Elon Musk didn’t want EV tax credits. Now Tesla is heating up

Washington, DC

Tesla buyers will be able to take advantage of new federal tax credits for electric vehicles next year, they said Wednesday. Credits can be $7,500 for new vehicles and $4,000 for used vehicles.

Tesla’s eligibility for previous tax credits ended in January 2020, when it reached the 200,000 limit of vehicles sold per automaker. The limit for 200,000 vehicles will be lifted on January 1 with the new rules, however The new requirements are stricter than the previous system. Tesla is waiting for the US Treasury to release detailed guidance by the end of the year.

The legislation is open as to how the government will calculate the value of battery components, but a significant portion of the components must be manufactured or assembled in North America to qualify for half of the $7,500 credit. The other half depends on critical minerals mined or processed in the United States or a country with a free trade agreement. Between 2024-2029 the percentages will gradually increase.

“It’s difficult to fully define the eligibility criteria at this point, but we think Tesla is very well positioned to capture a significant portion of that for solar storage and electric vehicles,” an unidentified Tesla representative said in an earnings call with investors on Wednesday. (Tesla often does not identify people who speak on behalf of the company during investor calls.)

The announcement marks something of a turnaround for the carmaker Tesla CEO Elon Musk has opposed tax credits for electric vehicles for the past year.

“We don’t need the $7,500 tax credit. I’d say, honestly, I’d say I just couldn’t afford this whole bill. Don’t pass it,” Musk said of the infrastructure bill in December 2021, citing concerns about the growing US deficit.

And when an early proposal to expand the EV tax credit included additional money for vehicles built by union workers, Musk was again critical.

“It’s not obvious how this benefits the American taxpayer,” Musk said. “This was written by Ford/UAW lobbyists because they make electric cars in Mexico.”

Musk has had a contentious relationship with the Biden administration, and was troubled by the White House’s highlighting of its competitors’ electric vehicle efforts. As recently as earlier this month, Musk told Republican Senator Lindsey Graham that “we didn’t ask for this,” referring to the tax credit included in the Inflation Reduction Act, “GM & Ford did.”

But Tesla and its executives received more from the tax credits on Wednesday.

“We see the passage of the Inflation Reduction Act as a significant boost to accelerating our mission while expanding the battery supply chain in the United States,” an unidentified Tesla executive said on the call.

Tesla allows the public to vote on questions its executives should answer. The top-voted question asked about Tesla’s ability to meet the thresholds for electric vehicle tax credits in 2023, 2024 and 2025.

Tesla did not address specific years, but Musk said “at a high level I will say we expect to be fully compliant with the IRA requirements.”

Another Tesla representative noted on the call that it manufactures its battery modules and vehicles in the US, which will help it rank.

Half of Tesla’s vehicle lineup will be eligible by default without a major price drop. The Tesla Model X SUV and Tesla Model S sedan seem unlikely to qualify, as SUVs should cost no more than $80,000 and sedans no more than $55,000. The cheapest Model X is $120,990 and the cheapest Model S costs $104,990.

Some versions of the Model 3 sedan and Model Y SUV may be eligible, but buyers will have to meet income requirements. A single buyer’s income cannot exceed $150,000, $225,000 if head of household or $300,000 if married.