Tesla to get US$41 billion in government subsidies over made-in-US EVs and batteries

The US government is on the hook for US$41 billion in total subsidy outlays towards Tesla and its battery partner Panasonic for the duration of the Inflation Reduction Act's tax credits eligibility. Those will be phased out in 2032, but until then Tesla will be the main beneficiary of the government's largesse in the US, by a large margin.

The IRA's stipulations give buyers up to US$7,500 in tax credit for each  eligible electric vehicle purchased between now and 2033, plus $45/kWh for a made-in-US battery pack to its manufacturer. The battery subsidy would essentially take $3,375 off the production cost of a Model Y, too, for a total of nearly nine grand in taxpayer-sponsored price reduction potential per unit that Tesla will benefit from in the next decade or so.

A sign that government incentives are going in the direction Tesla wants them to is its recent claim that the cheapest Model 3 versions now qualify for the full tax credit amount, too, even though the IRS still hasn't reflected that in its list. That's intriguing as they are powered by CATL's LFP batteries and hence are only eligible for the half of the subsidy that is awarded if the vehicle is made in the US. This would essentially make all of Tesla's cars qualify for the government's $7,500 subsidy and Tesla makes more EVs than anyone else.

Moreover, Tesla is building a giant 4680 battery factory in Nevada with 100 GWh in annual capacity when fully operational. That's another US$4.5 billion in potential battery subsidies each year, while Tesla is also expanding its Fremont and Texas battery facilities, not to mention it will be producing its own lithium in a new Gulf Coast refinery from next year.

All these activities could make Tesla the producer of both the cheapest batteries and the cheapest electric vehicles, thanks to more than $40 billion in government incentives over a decade. For comparison, its main US automaking competitors GM or Ford will get less than half of that amount for the period. That is not even counting what Tesla would get from Biden's nationwide EV charging network buildout where it is also positioned best to benefit from the government's tax credits.

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