While it could very well be that Tesla could bring back the $3,750 tax credit next year, there is no denying that the company will find it extremely difficult to do so, given the tightening of government regulations surrounding component sourcing and the origin of battery materials. The new regulations, taking effect in January 2024, prioritize domestic manufacturing, demanding a higher percentage of batteries and materials be sourced from North America. This puts Tesla in a bind, as its current supply chain leans heavily on overseas partners.
Currently, it is believed that all of the affected Tesla Model 3 variants use LFP battery cells that come from China. For these vehicles to continue to qualify for the tax credits, Tesla would need to switch to battery cells that are locally sourced and made in the U.S. Currently, it is unclear if Tesla has taken steps to carry out this change. If yes, there is a possibility that the $3,750 tax credit might make a comeback.
However, if Tesla decides it would be financially unviable for them to equip these vehicles with more expensive, locally sourced components, it could trigger a major overhaul of the 2024 lineup. This could involve discontinuing the RWD and Long Range versions, introducing new variants with higher local content, or raising prices to offset the costs.
