Tesla Hits Delivery Threshold for Juicy Federal Tax Credit
Tesla Motors announced Thursday that it officially reached 200,000 deliveries this month, which is good news in terms of overall sales. But the figure also means the company has surpassed the threshold requiring that federal tax credits be phased out, which is bad news.
Some speculate that, without government incentives, fewer people will be willing to buy Tesla-branded vehicles. While that’s a possibility, the brand offers unique, trendy models not readily available elsewhere. We’d presume a discount on an iPhone would probably help sales as well, but affordability it isn’t the main reason people purchase them.
We’ll see what kind of impact it has on the automaker as the $7,500 federal electric vehicle tax credit for new owners is gradually phased out. It will also be telling for the electric vehicle market as a whole, as Tesla is the first EV producer to reach the limit.
The company’s website now includes an incentives breakdown by date on its support page. As the first manufacturer to surpass the 200,000 vehicle limit, the brand will be able to retain the existing incentives through the end of the year. After January 1st, the federal tax credit will be reduced by half to $3,750. Six months later, it will be halved again before being completely eliminated at the start of 2020.
We’d imagine this will increase overall demand in the short term, though the long-term impact is unknown. Neither the Model S sedan and Model X crossover are particularly affordable vehicles, so we might see more lower-trimmed versions sold in the future. Meanwhile, the Model 3 is supposed to be Tesla’s budget car and would be a steal at $35,000 if government incentives were there to soften the blow. But the company isn’t building that version yet. Instead, it’s focusing on more expensive trims. The bargain Model 3 isn’t supposed to enter into production until the end of the year — right about the time the tax credit gets chopped in half.
[Image: Tesla Motors]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
More by Matt Posky
Comments
Join the conversation
I don’t think this will have an effect on Tesla sales. The cultists will buy a Tesla regardless. Everyone else will be more impacted by the fact that the car is built in a circus tent, displays abysmally low quality, the company hasn’t produced a profit ever, and that the CEOs only talent is issuing false promises.
Maybe the people buying a Model 3 will miss a 15% discount. But not those buying a Model S or X. With prices for most of those models pushing past $100k. The 7% discount on the purchase price isn't going to stop any of them.