Elon Musk Says IRS Qualification Norms For EV Credits 'Messed Up' — Why He Finds It 'Bizarre'

Ever since the IRS announced the qualifying criteria for availing of the electric vehicle tax credits allowed under the “Inflation Reduction Act Of 2022,” Tesla Inc. TSLA backers have expressed dissatisfaction about them.

What Happened: A Tesla influencer pointed out that the electric vehicle maker’s Model Y SUV does not qualify as an SUV for the U.S. tax credit as its weight of 238 pounds is considered to be too light.

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Taking a potshot at the government, the influencer offered a solution in jest. “Attach lead weights totaling 250 pounds to interior rear under-trunk via hex bolts. After sale is complete, provide free-of-charge first service to remove said weights,” he said on Twitter, tagging Tesla and CEO Elon Musk.

The tweet caught Musk’s attention, and in reply, the billionaire lamented being penalized for making the company’s SUV too mass-efficient. “This is bizarre,” he added.

This included Volkswagen AG VWAGY unit Audi’s TFSI e Quattro plug-in hybrid EV, BMW AG’s BMWYY xDrive45e, Ford Motor Company’s F Escape PHEV and Stellantis N.V.’s STLA Jeep Wrangler 4xe. He noted that all of these are hybrid vehicles, while Tesla’s Model Y is an all-electric vehicle, which incidentally doesn’t qualify for the credit.

Musk replied to it by saying, “This is messed up.”

Why It’s Important: Guggenheim analyst Ali Faghri said in a report released last week that with the new norms, Tesla’s pricing power will suffer. He noted that the five-seater Model Y price has to be cut by an unrealistic 17% to qualify for the EV tax credit. And the Model 3 prices need to be trimmed by a more modest 5%.

This would erode Tesla’s margin, which is already under pressure due to price cuts announced toward the end of 2022 to stimulate demand.

Price Action: Tesla shares fell about 65% in 2022 and ended the year at $123.18, according to Benzinga Pro data.

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