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Tesla just issued a warning that its Model 3 is about to get a lot more expensive — here's what's causing the price increase

Some speculate that this is essentially a sales tactic.

Tax Credit reduction for new Model

Photo Credit: iStock

Tesla has begun warning prospective customers that some of its vehicles will soon no longer qualify for the $7,500 electric vehicle tax credit that was included for certain vehicles as part of the Inflation Reduction Act of 2022 (IRA), as reported by Inside EVs.

The company alerted customers to this change through a banner at the top of its website but did not offer a specific reason why the tax credit is going away. However, Tesla did specify at first that the update applies specifically to the Model 3, then may have broadened this. 

"$7,500 Federal Tax Credit available for new Model 3 and Model Y. Reductions to tax credit likely after Dec. 31," the language on the site read, as of early August.

As Tesla is not actually obligated to inform customers about whether or not the tax credit is being reduced, per Inside EVs, that does raise the question of why they are doing it. Inside EVs speculated that this is essentially a sales tactic — by informing potential customers that the cars are "likely" to get a lot more expensive in about six months, the company can generate more urgency among buyers.

However, if the tax credit is indeed going away or being reduced, there has to be a reason behind it. On that front, Inside EVs speculated that it has something to do with the vehicle's battery requirements.

In order to qualify for the full tax credit in 2023, according to the language of the IRA (per Inside EVs), EVs must have batteries with "40% of the value of critical minerals … mined or processed in the United States (or FTA countries), or recycled in North America" and "50% of the value of battery components … manufactured or assembled in North America." Those percentages go up to 50% and 60%, respectively, in 2024.

However, since Tesla is rumored to be outsourcing all or part of its battery production to China for the Model 3, that could account for losing the tax credit.

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