Did Tariffs on China Doom This Model 3 Variant in the US?
Tesla removes Model 3 RWD from its website, with the shorter-range 272-mile variant equipped with a lithium iron phosphate (LFP) battery departing the lineup without notice.
US tariffs on certain Chinese products and technologies took effect at the end of September and include tariffs on EVs and their components.
The threat of tariffs has already affected the EV market in the US, with a number of automakers having revealed plans earlier this year to delay some models.
US tariffs on EVs produced in China have only entered into force days ago, on September 27, but they have been shaking up the EV market for the past year—and not just when it comes to Volvo or Lotus models.
Tesla has removed the most affordable version of the Model 3 from its order menu on its website, with the Model 3 RWD making a quiet exit.
This version of Tesla's best-selling sedan had a starting price of $40,630 and offered a range of 272 miles in the EPA cycle.
Why is this particular model no longer available?
Industry observers suspect the culprit is the fact that Model 3 RWD features an LFP battery produced in China, with Tesla making use of this increasingly popular battery composition for its shorter-range, entry-level model. Many Teslas in the US get their batteries from Tesla's gigafactory in Nevada.
Lithium iron phosphate (LFP) batteries have seen an increase in interest among automakers, offering a lower energy density but much more resilience over hundreds of charge and discharge cycles. As such, they have been an increasingly popular option for entry-level spec EVs.
As part of the tariff package, EV batteries produced in China are now subject to a 25% import tariff, while entire vehicles are subject to a 100% tariff.
However, this version of the Model 3 was perhaps doomed in the longer term even without the imposition of the tariff, as the LFP pack also made the sedan ineligible for the full $7,500 tax credit.
As a result, the most affordable Model 3 is now a Long Range RWD flavor, which features a starting price of $44,130 while offering a range of 373 miles in the EPA cycle, prior to any incentives including the revamped $7,500 federal tax credit.
The loss of this Model 3 variant to buyers is perhaps not significant enough to alter sales and delivery numbers in a noticeable way, but collectively the Model 3 and the Model Y crossover currently account for over 90% of Tesla sales.
So an entry-level model may have still played an important enough role for those who may have been aiming for battery longevity over a longer range, or simply did not need the extra range.
Overall, the tariffs are expected to have a bigger effect on automakers other than Tesla, with the mere plans for tariffs having already postponed or canceled outright the US offerings of a number of automakers.
In the longer term, the new tariffs could also complicate the prospects of a more affordable Tesla model, which is still in development according to Elon Musk's statements earlier this year.
This could be the case based on the possibility that its LFP battery, and other battery options, could be sourced from a Chinese supplier, even if the vehicle itself may enter production at several Tesla plants outside China.
Will the tariffs on EVs and their components produced in China generally benefit the EV market in the US, or affect it negatively? Let us know what you think in the comments below.