Tesla’s Model 3 and Model Y electric vehicles have been a popular choice for environmentally conscious consumers, thanks in part to the federal tax credits that can amount to up to $7,500. However, it seems that these tax credits are likely to be reduced after December 31, according to a change on Tesla’s website.

The federal tax credits have been a crucial factor in Tesla’s success, helping the automaker to achieve record delivery numbers. If the tax credits are reduced, it could have a serious effect on the company’s margins. While Tesla could fall back on its controversial price cuts, analysts are concerned that it may not be enough to keep the automaker afloat.

So why does Tesla expect to lose federal tax credits on its vehicles by the end of 2023? The answer lies in the government’s plan to enforce stricter rules on batteries. The tax credit is made up of two parts – a battery requirement and a critical minerals requirement.

To be eligible for the battery requirement in 2023, 50% of the vehicle’s battery must be assembled or manufactured within North America. If Tesla fails to meet this requirement, it may lose out on the tax credits entirely.

This could be a challenging task for Tesla, as many of its batteries are produced by Panasonic, a Japanese company. Tesla would need to develop a North American battery production line, which could be a costly process. The company may also need to source critical minerals from North America, which could prove difficult.

Looking beyond the challenges, this move towards stricter rules on batteries is a positive step towards reducing car emissions and protecting the environment. By incentivizing automakers to produce batteries locally, it reduces the carbon footprint associated with transporting batteries from overseas.

In conclusion, it seems that Tesla’s $7,500 federal tax credits are likely to be reduced after December 31, with stricter rules on batteries being the main cause. While this may initially be a setback for Tesla, it is a positive step towards reducing emissions and protecting the environment in the long term. For Tesla customers, it’s important to take this change into consideration when making a purchasing decision, as it could affect the overall cost of the vehicle. Ultimately, we should all aim to support environmentally friendly practices, whether that means choosing an electric vehicle or advocating for stricter regulations on carbon emissions.