Key Takeaways
- Tesla shares slumped Monday despite the company delivering the most vehicles on record.
- The government released new guidance last week on an electric vehicle tax credit. It could make Tesla’s cars ineligible.
- Tesla’s competitors like General Motors say their manufacturing processes are aligned with the new rules.
Tesla (TSLA) shares slumped 6% on Monday despite delivering a record number of vehicles in the first quarter after the U.S. last week changed tax credit eligibility for electric vehicles, potentially threatening the company’s growth.
The Treasury Department and the Internal Revenue Service’s new rules on electric vehicle tax credits could hurt automakers like Tesla. The credit was established under the Inflation Reduction Act and was designed to lower the cost of electric vehicles for buyers.
Tesla has already said the $7,500 credit for Model 3 real-wheel drives will drop on April 18, when the rules go into effect. Besides Tesla and General Motors, other large U.S. manufacturers include Ford (F).
The Treasury Department said Friday that 50% of a vehicle’s battery must be assembled or manufactured in the U.S. to qualify for up to $3,750 in credit. Additionally, 40% of minerals in a vehicle’s battery must be sourced from nations that have a free trade agreement with the United States to be eligible for another $3,750 credit. Those levels will continue to rise in the years to come, the department said.
The suggested retail price of a van, truck or SUV can’t be more than $80,000 and any other vehicle can’t be more than $55,000 to qualify.
Tesla probably got a boost in deliveries after the company slashed the price of its Model Y by $13,000 to become eligible for the tax credit. GM, conversely, could be one of the beneficiaries of the new rules: The company said its strategy is “aligned” with the government.
“We expect a number of our Ultium-based EVs, including the Cadillac Lyriq and additional EVs launching this year like the Chevrolet Equinox EV SUV and Blazer EV SUV, to qualify for the full $7,500 credit in 2023,” GM said in a statement.
That could give GM a competitive advantage over Tesla in the year ahead.
Many electric vehicles don’t meet the requirements for this tax credit, according to the Alliance for Automotive Innovation CEO John Bozzella.
Source: https://www.investopedia.com/tesla-slumps-tax-credit-7373031?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral&yptr=yahoo