Some Tesla Model 3 sedans Lose All Tax Credits Jan. 1

The Tesla Model 3 Rear-Wheel Drive (RWD) and Long Range trims will lose all access to federal electric vehicle (EV) tax credits after Dec. 31.

The EV maker posted the declaration on its website. It updates guidance Tesla issued last week when it said the vehicles would get half the $7,500 federal tax credit in January.

Tesla hasn’t made a change to its vehicles. Federal law changes at the turn of the year. We expect many EVs to become ineligible for tax credits, though the list of which cars will qualify in January changes by the day.

The law that creates the tax credits restricts where cars and batteries are built and where automakers get critical minerals used in battery construction. It breaks the $7,500 credit into two parts and creates separate mandates for each to promote domestic jobs and industry.

Today, China controls most of the global trade in EV components. Congress sought to spur domestic development by writing a series of restrictions into the law promoting minerals originating from the U.S. or certain trade partners.

Related: How Do Federal EV Tax Credits Work?

Each set of restrictions tightens when the calendar flips to 2024.

That means some cars that qualify today will likely lose access to one or both parts of the tax credit.

Automakers are still calculating the law’s effects and updating their lists of qualifying cars.

We Expect More Changes

The situation is fluid because automakers are scrambling to obtain new supplies of key minerals. A car that doesn’t qualify one day could be eligible the next if the company that builds it inks a new deal for cobalt or lithium.

So far, automakers have told us the Chrysler Pacifica plug-in hybrid should still qualify on Jan. 1. Reuters reports that the Ford Mustang Mach-E will not. 

Most other automakers have declined to answer our questions on the matter — probably an indication of ongoing negotiations with suppliers.

Leased vehicles will still qualify. The IRS applies a looser set of rules to those. Another change to the law lets Americans use the rebate as a down payment next year rather than waiting to claim it on their taxes.

Don’t Rush Unless You’re Definitely Buying Soon

The news is changing daily. But if you’re car shopping, don’t let it push you into an expensive decision.

If you already plan to buy a Model 3, buying by Jan. 1 might save you $7,500. If you’re not sure you want to, the looming deadline probably isn’t a reason to spend thousands of dollars.

Automakers can qualify for the credits at any time, so some may earn them back later in 2024 as they ink deals with new suppliers. We wouldn’t be surprised if Tesla changes its suppliers and the Model 3 qualifies for the discount again soon.

We’ll keep you posted on which cars qualify as the list evolves.  

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