Tesla looks to keep vehicle prices low thanks to big tax credits awarded by Inflation Reduction Act.
to follow suit, adding to the extraordinary profitability challenges the old guard already faces in electrifying their lineups.
The outsize benefit Tesla reaps from the law makes for an inconvenient political reality for Musk: His company has gained an advantage from the key policy achievement of a president In the immediate wake of the IRA’s passage, the industry and analysts focused largely on how the law’s EV tax credits for consumers might reshape the market. Now, it’s sinking in that the production credits are the real prize — especially for Tesla, given that it already has commanding share of the market.
more benefit from the IRA than anyone else because they are already making batteries in high volumes,” said Austin Devaney, the chief commercial officer of Piedmont Lithium Inc., which has supply agreements with Tesla and battery maker LG. It provides $45 per kilowatt-hour for battery packs made in the U.S.: $35 per kWh for the battery cells, and $10 per kWh for the battery modules. Most EVs in the US have 60 kWh to 100 kWh batteries. That translates to tax credits of roughly $2,700 to $4,500 per vehicle.
These variables may explain why Tesla’s own expectation for its haul from the credits is lower than the one by Benchmark Minerals, which includes Panasonic’s share of the credits. Production forecasts may also vary. Kirkhorn said in January that Tesla expects the manufacturing tax credit in the IRA could mean $150 million to $250 million per quarter for the company in 2023, or up to $1 billion for the year.
The production credit begins to phase out in 2030, so there’s urgency to get battery plants up and running quickly. As more car companies receive the credits in higher volumes, the profusion of new EV models will intensify the price war, said Sam Abuelsamid, a Guidehouse“The next three to five years are going to be tough for everybody in the industry, and it’s going to be a dog fight,” he said.
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