Tesla’s Model 3 cheaper than Toyota’s Camry with tax benefits
All Tesla Model 3 vehicles in the United States now qualify for the full $7,500 electric vehicle consumer tax credit, following rapid adjustments to the company’s battery supply chain. The credit, combined with other tax breaks, could lower the cost of the Model 3 to less than a Toyota Camry. Tesla had previously lowered the credit for its Standard Range Rear Wheel Drive and Long Range All-Wheel Drive models to $3,750. However, following changes to battery sourcing rules in April, all versions of the Model 3 now qualify for the full credit. The Biden administration confirmed the shift on its fueleconomy.gov website.
Factory expansion plans
Tesla may have made adjustments to its battery supply chain in order to maintain subsidy eligibility. Some analysts have speculated that the company has dropped CATL, a Chinese supplier, in favour of Panasonic for its US-made Model 3 Rear Wheel Drive, the most affordable version. This could be because Panasonic has a battery cell factory in Nevada, which complies with federal requirements on local battery components; CATL and LG Energy Solution, two of Tesla’s other suppliers, do not have equivalent factories in the United States. When asked about Tesla’s supply arrangements to North America, CATL said, “The strategic partnership between the company and customers has not changed and will continue to deepen and improve.”
Panasonic said on Tuesday that it plans to expand production of electric vehicle batteries at the Nevada factory it jointly operates with Tesla by 10% within three years. Earlier this year, the Japanese supplier delayed the rollout of the 4680 batteries it is producing for Tesla, in favour of its existing 2170 battery cell.
FAQs
What are the US federal tax credits for electric vehicles?
The US government offers a $7,500 tax credit for new electric vehicles. However, this credit starts to phase out once a car makers sells 200,000 eligible vehicles. Tesla has already reached this threshold, which is why its credit amounts have decreased in recent years.
Which Tesla models are eligible for the $7,500 federal tax credit?
All of Tesla’s Model 3 vehicles in the United States are now eligible for the full tax credit. However, other Tesla models – including the Model S, Model X, and Model Y – are not eligible, as Tesla has already sold more than 200,000 of these cars in the United States.
How do state tax credits interact with federal tax credits?
Many US states, including California, offer their own tax credits for electric vehicles in addition to the federal credit. Buyers can combine these credits to save even more money on their purchases, although the amount of state credit available varies from state to state. High-income buyers may not qualify for certain state credits.
With tax benefits, the cost of Tesla’s Model 3 is lower than that of Toyota’s Camry.
Tesla has made a rapid adjustment of its battery supply chain, resulting in all of its Model 3 vehicles being eligible for federal US credits. This has allowed the electric car manufacturer to offer a price that could be lower than a Toyota Camry, boosted by tax breaks and credits. On Tuesday, the Biden administration confirmed that all Tesla Model 3 vehicles are qualified for $7,500 electric vehicle consumer tax credits. In April, battery sourcing rules went into effect that lowered the credit of the Model 3 Standard Range Rear Wheel Drive and Long Range All-Wheel Drive to $3,750. However, Tesla has confirmed that all versions of the Model 3 are now eligible for the full credit. Analysts have suggested Tesla may have tweaked its battery supply chain to meet both battery mineral and battery component requirements for federal subsidy. It is speculated that Tesla dropped CATL in favor of Panasonic for US-made Model 3 Rear Wheel Drive to meet battery component requirements locally, instead of using cheaper iron-based cells from CATL. Panasonic said it plans to expand production of electric vehicle batteries at the Nevada factory jointly operated with Tesla by 10% within three years. Meanwhile, Tesla has started delivering China-made Model 3s and Model Ys to Canada, freeing up some capacity for US-made models.