Tesla urges Model 3 buyers to 'take delivery' before expected tax credit reduction

March 30, 2023 6:29 AM EDT

By Scott Kanowsky -- Tesla Inc (NASDAQ: TSLA) is encouraging its customers to "take delivery now" of its popular Model 3 electric vehicle before an expected decline in a tax credit for buyers of the car at the end of March.

In an update to the U.S. version of its Model 3 website on Wednesday, the company said it anticipates that a tax credit of up to $7,500 first established in January by the Biden administration's $430 billion Inflation Reduction Act will be reduced for its Model 3 Rear-Wheel Drive.

However, Tesla stressed that the credit will remain in effect for any deliveries taken before an update to federal rules. It added that the Treasury Department and the Internal Revenue Service intend to issue that change "no later than March 31."

Under the current rules, customers who buy the Model 3 for their own use and primarily drive it in the U.S. qualify for the tax credit.

The Treasury Department's latest guidance will partly pertain to battery sourcing requirements and result in fewer vehicles receiving full or partial credits, Reuters reported, citing an unnamed U.S. official.

The Treasury previously announced in February that it had updated its classification standard for what defines a sedan, SUV, crossover or wagon. As a result, more EVs made by Tesla and peers like Ford Motor Company (NYSE: F) and Volkswagen (ETR:VOWG_p) became eligible for the credit.

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