Refreshed Tesla Model 3 LR Now Qualifies for the Full $7,500 Tax Credit, Starts at $39,990

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Tesla Model 3Tesla Model 3 LR now qualifies for the full $7,500 tax creditTesla Model 3 prices with tax credit2025 Tesla Model 3 Performance2025 Tesla Model 3 Performance2025 Tesla Model 3 Performance
Tesla announced that the Long Range variant of the refreshed Model 3 is now eligible for the full $7,500 tax credit. With the point-of-sale credit, the Model 3 Long Range price now starts at $39,990, making it once again a worthy choice in Tesla's lineup.
Sales of the refreshed Model 3 haven't impressed many people, affecting Tesla's delivery numbers in the first quarter and possibly in the second quarter, too. Although the redesigned electric sedan has been praised for its features, it was hardly an exciting proposition because the price did not align with customers' expectations. The reason was that it did not qualify for the federal tax credit, making it more expensive than the Model Y for those eligible.

Indeed, the base variant, the Model 3 RWD, was built with lithium-iron-phosphate (LFP) cells imported from China. The Long Range variant used nickel-manganese-cobalt (NMC) cells produced by LGES with components from China, making it unfit for the IRA tax credit. The Americans had to wait until April for the Model 3 Performance, the first variant eligible for the EV tax credit. This made it a hot commodity, especially as it was cheaper than the Model 3 Long Range, thanks to the federal tax credit.

Tesla announced that the Long Range trim is now eligible for the full $7,500 federal tax credit. This suggests that the EV maker has switched battery suppliers. Thanks to the point-of-sale federal tax credit and a $250 price cut, the refreshed Model 3 Long Range can be ordered for $39,990. That's assuming the buyer is also eligible (has a yearly income under $150,000 or $300,000 for dual filers).

The new price, psychologically set at just under $40,000, will give Model 3 Long Range sales a much-needed boost. However, Tesla has only moved the sweet spot of the Model 3 lineup lower, making the Model 3 RWD a tough sell. Qualifying an LFP battery EV for the EV tax credit would be difficult, requiring battery production in North America. Although Tesla indicated that it intends to license the LFP tech from CATL, it will take a long time to fine-tune and get the production line up to speed.

Tesla analyst Troy (@TroyTeslike) thinks that Tesla is now using Panasonic 2170 cells instead of those supplied by LGES, making the LR Model 3 eligible for the tax credit. This makes sense, given that Model Y production at Giga Texas is lower than usual, meaning that Tesla might have unutilized Panasonic 2170 cell capacity at Giga Nevada. The Model 3 Performance already used Panasonic cells.

Panasonic will probably start 2170 cell production at a new factory in Kansas in mid-2025, ending Tesla's reliance on LGES cells imported from China. Once ramped up, Tesla could use software-capped NMC battery packs in the Model 3 RWD variant instead of LFP. After all, it already does it with the Model Y RWD. This move makes sense, considering the incentives Tesla gets for the locally-produced battery cells on top of the point-of-sale EV tax credit.
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About the author: Cristian Agatie
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After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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