US: All Tesla Model 3 Versions Qualify For $7,500 Federal Tax Credit Now

Tesla has just applied a pretty groundbreaking update to its online Model 3 design studio, revealing that all versions of the car qualify for the full $7,500 federal tax credit in the United States.

Previously (since April 18, 2023), only the Performance version was eligible for the $7,500 incentive, while the other versions were eligible for half the amount – $3,750.

“$7,500 Federal Tax Credit

All new Model 3 vehicles qualify for a federal tax credit for eligible buyers.”

When deducting the incentive (and the obligatory destination charge, order fee), it turns out that the entry-level Tesla Model 3 Rear-Wheel Drive (RWD) starts effectively at $34,380 (in May it was $38,130). Not bad for a car with an EPA Combined range of 272 miles (438 km).

This is a very important strengthening of the car’s competitiveness, as there are only a few other battery-electric vehicles (BEV) that can be bought cheaper (see the price comparison as of the end of May 2023).

Not only that, the re-introduced Tesla Model 3 Long Range All-Wheel Drive (AWD) version, combined with the $7,500 federal tax credit, is a whole less confusing than before when it was qualified only for $3,750, and priced very close to the Performance version. The difference between the two is now $6,000, compared to $2,250 previously.

Below, we attached prices of all Tesla electric cars, as of June 3, 2023.

Tesla EV Prices

ModelBase PriceDest. ChargeTax CreditEffective Price
2023 Tesla Model 3 RWD 18-inch$40,240+$1,640$7,500$34,380
2023 Tesla Model 3 RWD 19-inch$41,740+$1,640$7,500$35,880
2023 Tesla Model 3 Long Range AWD 18-inch$47,240+$1,640$7,500$41,380
2023 Tesla Model 3 Long Range AWD 19-inch$48,740+$1,640$7,500$42,880
2023 Tesla Model 3 Perf. LR AWD 20-inch$53,240+$1,640$7,500$47,380
2023 Tesla Model S LR AWD 19-inch$88,490+$1,640N/A$90,130
2023 Tesla Model S LR AWD 21-inch$92,990+$1,640N/A$94,630
2023 Tesla Model S Plaid 19-inch$108,490+$1,640N/A$110,130
2023 Tesla Model S Plaid 21-inch$112,990+$1,640N/A$114,630
2023 Tesla Model X LR AWD 20-inch$98,490+$1,640N/A$100,130
2023 Tesla Model X LR AWD 22-inch$103,990+$1,640N/A$105,630
2023 Tesla Model X Plaid 20-inch$108,490+$1,640N/A$110,130
2023 Tesla Model X Plaid 22-inch$113,990+$1,640N/A$115,630
2023 Tesla Model Y AWD (4680) 19-inch$47,490+$1,640$7,500$41,630
2023 Tesla Model Y AWD (4680) 20-inch$49,490+$1,640$7,500$43,630
2023 Tesla Model Y Long Range AWD 19-inch$50,490+$1,640$7,500$44,630
2023 Tesla Model Y Long Range AWD 20-inch$52,490+$1,640$7,500$46,630
2023 Tesla Model Y Perf. LR AWD 21-inch$54,490+$1,640$7,500$48,630

* Tesla adds a Destination fee (DST) of $1,390 and an Order Fee of $250 to all its models ($1,640 total).

How is it possible?

The main question is how Tesla was able to qualify all Model 3 versions for the full $7,500 federal tax credit. As we know, the LFP batteries (CATL) sourced from China were the issue in the Model 3 RWD.

Let’s recall that the federal tax credit requirements, under the Inflation Reduction Act of 2022 (IRA), on top of local production in North America, also include:

  • 40 percent of the value of critical minerals needs to be mined or processed in the United States (or FTA countries), or recycled in North America
  • 50 percent of the value of battery components must be manufactured or assembled in North America

Meeting only one of the requirements means eligibility only for half the amount ($3,750). This was the case with the Tesla Model 3 RWD on April 18, 2023.

If the model now qualifies for $7,500, it means that Tesla tweaked its supply chain to meet both requirements.

We don’t know anything for sure, but it might have something to do with the recent changes in Canada, which according to Drive Tesla Canada, switched from US-made cars to China-made cars (Model 3 RWD, Model 3 Long Rande, Model Y RWD, Model Y Long Range recently and Model Y Performance).

This probably unlocks some manufacturing capacity in Fremont, California. There might also be some interesting deals with suppliers, which allow to add more value to the battery pack production in the US.

Sources: Tesla, Drive Tesla Canada

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