You’re here (TSLA) reported on Wednesday that it expects a reduction next year in the $7,500 federal tax credit for all versions of Model 3 vehicles. This comes just a month after the global vehicle giant has mysteriously secured every Model 3 vehicle eligible for a full tax credit under the Inflation Reduction Act (IRA). Tesla stock rose slightly on Wednesday.
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The company posted a banner on its website Wednesday morning stating that the $7,500 federal tax credit is available for all Model 3 trims. However, Tesla added “likely reductions after Dec. 31.”
Tesla’s proclamation that IRA tax credit reductions may come in 2024 for Model 3 vehicles is not present on the Model Y website page.
The stock gained 1.5% to 273.81 on Wednesday in market trading. Shares rose a fraction on Tuesday to 269.79.
In early June, Tesla secured all Model 3 vehicle trims eligible for the full $7,500 tax credit. The model previously only qualified at the $3,750 level. Tesla did not disclose how it aligned the Model 3 with IRA requirements for the full tax credit.
The Internal Revenue Service (IRS) confirmed the change on its website on June 6. The IRS currently maintains that all Model 3 and Model Y vehicles are eligible for the $7,500 tax credit.
The Model 3 tax credit doubles
The Biden administration said March 31 that vehicles eligible for the full $7,500 tax credit must have batteries with specific amounts of North American-made components and critical minerals sourced from the United States or other countries. specified.
Vehicles that meet only one of the essential mineral or battery component requirements are eligible for a tax credit of $3,750. At the time, the base-drive Model 3, with its battery from China, was not eligible for the full tax credit.
After Tesla made all Model 3 vehicles eligible for the $7,500 tax credit, Morgan Stanley Adam Jonas wrote that the qualifying change “implies that Tesla likely changed its supply chain to meet both requirements.” .
The question of admissibility
Tesla used China’s CATL lithium iron phosphate (LFP) batteries for the base Model 3. However, after the eligibility change in early June, CATL denied rumors that Tesla had ended their relationship.
Jonas told investors that Tesla may have switched to manufacturing Model 3 batteries in the United States while using battery cells made in China. Analysts have also floated the idea that with Shanghai Tesla exporting to Canada, it could free up battery production in the United States for local deliveries.
Or, Jonas said, it could just be “regulatory semantics.” According to guidelines issued by the US Treasury, manufacturers of electric vehicles can average the content of eligible critical minerals used over a limited period of time.
Jonas said that language means Tesla could produce enough qualifying Model 3 batteries at its Fremont plant to offset the China-made battery in the Model 3 rear-drive trim.
Tesla stock: results to come
TSLA shares are up about 120% in 2023 and 164% from their January 6 low. However, Tesla stock is still well below its all-time high of 414.50, reached in November 2021.
On June 2, Tesla pulled out a buy point of 207.79 from a double bottom cup or base. It was part of a record 13-game winning streak for Tesla, with the last 12 having above-average volume. Stocks paused in late June amid the general market pullback, but rebounded near the 21-day lines.
TSLA jumped 6.9% to 279.82 on July 3 after strong second-quarter delivery numbers, erasing a brief break to hit a nine-month high.
Tesla announces its second quarter financial statements on July 19. Last week, Tesla reported record global shipments as price cuts, tax credits and rebates propelled demand well above Wall Street forecasts.
Tesla deliveries were 466,140 in the second quarter, topping the first quarter record of 422,875 and the fourth quarter record of 405,278. That easily topped second-quarter estimates of about 445,000, according to FactSet.
Model 3 and Model Y deliveries reached 446,915 in the second quarter. Model S and X deliveries reached 19,225.
Production reached 479,700, again exceeding deliveries, even with Tesla limiting production below capacity.
The stock ranks third in the IBD automaker industry group. It has a composite rating of 98 out of 99. Tesla has a relative strength rating of 95 and its EPS rating is 93 out of 99.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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