Tesla Model 3 Tax Credit Expected to be Reduced After Year End

Tesla's Model 3 is expected to lose half of its tax incentive

Tesla

Tesla has sounded the alarm bells once again regarding the potential reduction in the federal tax credit. As the year-end approaches, potential buyers may want to make a decision and possibly save some money, as there may be a significant impact on the final price tag of their electric car.

The December Dilemma

The order page for the Model 3 now states:

All new Model 3 vehicles currently qualify for a federal tax credit for eligible buyers. $7,500 tax credit expected to reduce to $3,750 on Dec 31, pending federal guidance. Take delivery to guarantee full incentive.

Changes to the Tax Credit

The 2024 tax credit's eligibility criteria will tighten. Specifically, the requirement for critical minerals used in batteries, such as those extracted or recycled within the U.S. (or nations with a U.S. free trade agreement), will increase from 40% to 50%. Furthermore, the mandate for battery components will also intensify, with 60% of these components needing domestic manufacturing or production within free trade agreement nations. Vehicles that don't meet these more stringent guidelines will only access half the credit, $3,750 USD.

A Flashback to July's Warning

We've heard the warning before. In July, Tesla made a somewhat ambiguous warning about the impending decrease of the coveted $7,500 tax credit on some of its vehicle models. Back then, while all Model Ys were eligible for the full credit, the base version of the Model 3 faced a restriction due to its use of Chinese battery cells. This particular battery choice made it eligible for just half the credit. The higher-end models, Model S and Model X, didn't qualify because of their premium pricing. In an exciting twist, Tesla announced that even the base Model 3 would be eligible for the full tax credit.

The Highland is Coming

Fast forward to the present, Tesla is again cautioning its consumers. It is worth noting that Tesla plans to roll out the new Model 3 Highland to North America in 2024. While it hasn't reached the U.S. shores yet, this development could be strategic. Clearing out stocks of the older design Model 3s before the Highland's U.S. debut could be why Tesla urges consumers to capitalize on the current tax incentives by taking delivery soon.

Also, Tesla missed its third-quarter projections. There are plenty of valid reasons behind having fewer deliveries. However, the point remains that the numbers were down. If we have learned anything about Elon Musk over the years, he likes to show constant improvement. We saw this late last year when Tesla rolled out some significant price decreases as the end of the year approached.

As we venture into 2024, some pivotal shifts are expected in the electric vehicle federal tax credit framework. The most notable change is the point of access - it will transition from a tax rebate to an immediate discount at the dealership.

Tesla reiterates concerns about the potential tax credit reduction, and prospective buyers must be proactive. The clock is ticking, and decisions made in the next few months could save some cash or be a moot point.

NHTSA to Streamline Approvals for Control-Free Vehicles Like Tesla’s Cybercab

Not a Tesla App

In a letter to industry, the National Highway Traffic Safety Administration (NHTSA) has announced that it is overhauling its approvals process for vehicles designed without human controls.

The change addresses a regulatory bottleneck that has slowed down American companies like Tesla from deploying purpose-built Robotaxis, rather than relying on using traditional vehicles with steering wheels and pedals. The policy shift is outlined in a letter posted to the NHTSA’s website, which you can find here.

Reducing Approvals From Years to Months

Under the existing rules today, any vehicle that is built without a steering wheel or brake pedals must receive a special exemption from federal safety standards.

Obtaining exemptions for a particular vehicle was a time-consuming process for both the companies requesting exemptions and the NHTSA. The process was often a black box—nobody knew when an exemption might be granted, and approvals could take years.

The NHTSA, under the new administration’s guidelines for autonomous vehicle development, is now committed to streamlining this process. The agency will be implementing a new, faster approach immediately for receiving exemptions for autonomous vehicles without standard controls. The NHTSA expects decisions on exemption requests to be determined within months rather than years. 

Accelerating the Cybercab

This change has massive implications for Tesla, which is banking on the production of the simplified and easy-to-maintain purpose-built Cybercab. The Cybercab is developed from the ground up as an autonomous Robotaxi and will be one of the key beneficiaries of this move by the NHTSA.

Knowing that a final design won't be caught in a multi-year regulatory limbo provides a level of certainty that has been missing. It allows Tesla to confidently plan the manufacturing, development, and deployment processes without worrying whether the project will get stuck in regulatory approvals.

According to the letter, the agency will publish its improved instructions for the streamlined process "shortly." With Tesla already having begun Cybercab pre-production and the goals for its deployment as soon as late 2026, there’s still a lot to be done to make autonomy a part of Tesla’s new sustainable abundance mission statement.

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You Can Now Track Tesla’s Robotaxi Deployment

Not a Tesla App

Thanks to Tesla Yoda on X, we have found out that Tesla’s Robotaxi fleet is registered on the Texas Department of Transportation’s public-facing Automated Vehicle Deployment website. This makes the fleet’s movements publicly viewable and trackable, and marks a first for Tesla.

This isn’t just any old FSD test - this is the first officially acknowledged, government-tracked, and sanctioned deployment of a Tesla Model Y operating as a ride-share vehicle. But that’s not all - Texas DOT’s tracker notes that the Tesla does not have a safety driver.

View on the Map

Visitors to the Texas DOT website can filter for “Tesla”, and see, currently, a single active vehicle operating in the Austin Metro area. According to the state’s official data, here’s what we know:

Company: Tesla

Description: Ride-share service

Status in Texas: Testing

Safety Driver: No

The final point is definitely the most interesting here. While Tesla has been testing FSD with safety drivers for some time in Austin and LA for employee-only testing, this is the first time that a vehicle has been officially registered and deployed on public roads without a human behind the wheel for safety. 

The fact that there is no safety driver officially shifts the liability from the occupant of the driver’s seat to Tesla, for the first time in a public setting. That’s already pretty significant - we previously dove into how Tesla plans to insure its own vehicles, and potentially owner vehicles in the Robotaxi fleets. 

The status currently lists Tesla as “Testing,” confirming that the service isn’t available to the public, but this is expected to change in the coming weeks.

This testing phase is likely part of a short but crucial period that lets Tesla capture data on the safety levels of its current iteration of Unsupervised FSD without a driver supervising. Tesla already stated that they’d be avoiding difficult areas, so this testing can also expose additional areas Tesla may want to avoid, such as school zones or blind driveways.

Tesla will need to prove, both internally and externally, that FSD Unsupervised has the necessary performance to safely navigate the streets without any incidents.

Regulatory Milestone

For years, the concept of a Tesla Robotaxi has been a future promise. Now, it's a present-day reality, albeit in a testing capacity.

Having an official government body list a Tesla as an active, driverless vehicle shows that they’ve been able to clear regulatory hurdles, which Tesla has often pointed to as the issue. It demonstrates a level of confidence from both Tesla and Texas regulators in the system's capabilities.

While it's just a single vehicle for today, we’ll likely see this list slowly expand over time. Alongside being able to track Robotaxi incidents at the City of Austin’s website, we’ll be able to closely watch Tesla’s progress with its first Robotaxi deployments.

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