All of the Tesla (TSLA) Model 3 vehicle trims are now eligible for the full tax credit under the Inflation Reduction Act (IRA), the Internal Revenue Service verified Tuesday. While it remains unclear how the global EV giant accomplished the feat, the Model 3 now has a starting price of around $32,000. TSLA stock jumped Wednesday.

Tesla stock advanced 1.6% to 224.83 Wednesday during market trade with Tesla Model 3 vehicles going for as low as $30,330 on the company's website.

Tesla is officially saying the Model 3 starts at $32,740 after the $7,500 IRA tax credit. Meanwhile, reports circulated early Wednesday that Tesla has agreed in principle with a plan to set up a manufacturing plant in India. Tesla's website recently stated that the base Model 3 vehicle was eligible for the full $7,500 tax credit under the IRA. The model previously only qualified at the $3,750 level. Tesla has not disclosed how it brought the Model 3 into alignment with IRA requirements for the full tax credit. Meanwhile, the IRS made the official change to its site Tuesday morning. It announced all Model 3 and Model Y vehicles qualify for the $7,500 tax credit.

Model 3 Tax Credit Doubles

The Biden administration said on March 31 that vehicles eligible for the full $7,500 tax credit must have batteries with specific quantities of components manufactured in North America and critical minerals sourced in the U.S. or from certain countries.

Vehicles that meet only one of the critical minerals or battery components requirements are eligible for a $3,750 tax credit. At the time, the base rear-wheel-drive Model 3, with its battery from China, did not qualify for the full tax credit.

Tesla stock shrugged off early losses and climbed 1.7% to 221.31 Tuesday. It turned higher just after the IRS confirmed the Model 3 eligibility. TSLA has gained in the past seven sessions. It has gained 117% since early January lows of 101.81.

The Eligibility Switch

Late Monday, Morgan Stanley Adam Jonas wrote the qualification change "implies that Tesla likely tweaked its supply chain to meet both requirements.

"Tesla has used lithium iron phosphate (LFP) batteries from China's CATL for the base Model 3. CATL commented Monday that rumors Tesla has ended their relationship are untrue and there is no change in the strategic partnership.

Jonas told investors Tesla may have switched to manufacturing Model 3 battery packs in the U.S. while still using China-made battery cells. The analysts also floated the idea that, with Shanghai Tesla exporting to Canada, it could be freeing up U.S. battery production for local deliveries.

Or, Jonas said, it simply could be "regulatory semantics." Under guidance issued by the U.S. Treasury, EV manufacturers can average the qualifying critical mineral content used over a limited period of time. Jonas said this language means Tesla could produce enough qualifying Model 3 batteries at its Fremont plant to offset the Model 3 rear-wheel drive trim's China-made battery.