12:52 PM EDT, 10/03/2024 (MT Newswires) -- Tesla (TSLA) removed its most affordable Model 3 sedan from its website's US order page in a signal that recent tariffs on Chinese imports present a "double edge sword" for US automakers, Wedbush Securities said Thursday.

The Model 3 standard range rear-wheel drive that was priced at around $39,000 uses lithium iron phosphate battery cells sourced from China, according to analysts including Daniel Ives. These components fall under recent US tariffs that include a 100% duty on EVs and 25% on EV batteries and key minerals, Ives said.

Vehicles that use lithium iron phosphate battery cells made in China are ineligible for the $7,500 federal tax EV credit. With the Model 3 standard removed, Tesla is no longer selling any cars with that type of battery cells, according to the brokerage's report.

Increased taxes on Chinese EVs sold in the US market help US automakers by reducing the competitive threat from Chinese manufacturers such as BYD, Nio (NIO) and Xpeng (XPEV). "However, the battery and component technologies sourced from China make this a moving target on the battery front to navigate this ever changing tariff environment and raw materials landscape for Tesla in particular," Ives said.

Shares of Tesla fell 2.7% in midday trade. On Wednesday, Tesla's third-quarter delivery numbers missed Wall Street's whisper numbers, Wedbush said in a separate note at the time.

The brokerage reiterated an outperform rating and a $300 price target on the stock, saying that Tesla has an opportunity to capture US demand, with most price cuts in the rear view mirror.

The next best option for Tesla shoppers looking for an entry level vehicle would be the Model 3 long range rear wheel drive, which retails for nearly $42,500 but costs $35,000 when including the tax credit, according to Wedbush.

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