U.S. Commerce Secretary Howard Lutnick introduced a policy through which vehicles containing 85% or more domestic components would receive complete exemption from new automobile tariffs. The policy aims to encourage domestic manufacturing, but its current effect shows that Tesla remains the sole manufacturer that meets the requirements.
The Kogod School of Business at American University reports that only three Tesla models reach the 85% requirement: Model 3 Performance (87.5%) and Model Y in two variants (both at 85%). The Cybertruck (82.5%) and Ford’s Mustang lineup (80%) stand behind Tesla in their compliance with domestic content requirements. The next best, Honda’s Alabama-built Passport, clocks in at 76.5%.
This could allow Tesla to maintain a unique position in the automotive market because it avoids the 10% import tariff base and the 25% surcharge that other automakers must bear, which could either destroy their competitors or require major supply chain reorganization. A two-year rebate program exists, but it will likely fail to assist manufacturers in crossing the 85% threshold before the deadline.
The timing of this exemption has sparked questions because Elon Musk has been spending a lot of time at the White House recently. The regulatory exemption has given Tesla operational clarity and a substantial pricing edge in the current market turbulence, even though the company’s revenue has taken a hit due to Musk’s political activities.
The small percentage gap between 80% and 85% domestic content for Ford and Honda will result in substantial tariff payments. The policy appears neutral on paper, but it creates an immediate outcome that grants Tesla a valuable exception that other companies must navigate through challenging times.
