According to the report, Tesla communicated to employees that it expects the new policy to be finalized by April 1 — at which point it expects buyers of its cheapest model, the Tesla Model 3, to be shunned from receiving the full tax credit. The forewarning was likely made to prepare employees to properly communicate these changes with anyone who is currently shopping or closing on a purchase.
Though the Tesla Model 3 is produced in California, it uses batteries that are largely manufactured in China. Specifically, it uses Lithium Iron Phosphate (LFP) batteries, which are likely cheaper to produce in China thanks to the country’s access to the core commodities and materials needed to produce them. Those resources include graphite and lithium-ion, both of which China has in abundance.
To be clear, Tesla doesn’t have to source batteries strictly from within the U.S. to keep its vehicles eligible, but any foreign supplier must be within countries that have free trade agreements, which would include the likes of Canada and Australia. Long story short, the Model 3 is as cheap as it is due to decisions like these, and Tesla may have determined that these upfront cost savings are more valuable for the market segment it’s after.
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