Tesla stock (TSLA) surged in early June, up as much as 4 percent in early trading and hitting highs not seen since early October of last year, as investor bullishness grew following news that all Model 3 sedans now qualify for the full federal electric vehicle tax credits. Tesla stock is on track for its longest winning streak since January 2021.
Tesla announced that all versions of the Model 3 sedan now qualify for the full federal EV tax credit of $7,500; previously the less expensive Model 3 rear wheel drive version qualified for half the amount. The federal government confirmed the announcement on its fuele-conomy.gov website.
The EV tax credits were mandated by Congress last August as part of the Inflation Reduction Act with the goal of ending U.S. reliance on China for batteries. The full $7,500 tax credit is broken into two parts. EVs can qualify for half, or $3,750, if 50 percent of the value of battery components were produced or assembled in North America; the other half requires 40 percent of the value of critical materials be sourced from the U.S. or another free trade agreement country.
Initially, when the tax credits began on January 1, the U.S. Treasury Dept. held off on publishing the battery sourcing guidance in order to give EV-makers time to meet the requirements. On April 18, the department began enforcing the critical material sourcing requirement, which led to many vehicle models losing the full tax credits they had been eligible for in the first quarter of the year.
Tesla’s Model 3 saw its full credit slashed in half, but many other auto-makers — like BMW, Rivian, Volvo and Hyundai — lost their credits entirely.
Now, it appears that all Tesla vehicles will be eligible for the full $7,500 credit. Previously, the only Model 3 that qualified for the full tax credit was the Model 3 Performance. Now, the Model 3 long-range all-wheel drive and rear-wheel drive will also qualify. The Model 3 rear-wheel drive now starts at $32,740 when the tax credit is applied.
