Tesla Hits Delivery Threshold for Juicy Federal Tax Credit

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

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.

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  • EBFlex EBFlex on Jul 13, 2018

    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.

  • Mermilio Mermilio on Jul 13, 2018

    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.

  • TCowner We've had a 64.5 Mustang in the family for the past 40 years. It is all original, Rangoon Red coupe with 289 (one of the first instead of the 260), Rally Pac, 4-speed, factory air, every option. Always gets smiles and thumbs ups.
  • ToolGuy This might be a good option for my spouse when it becomes available -- thought about reserving one but the $500 deposit is a little too serious. Oh sorry, that was the Volvo EX30, not the Mustang. Is Volvo part of Ford? Is the Mustang an EV? I'm so confused.
  • Mikey My late wife loved Mustangs ..We alway rented one while travelling . GM blood vetoed me purchasing one . 3 years after retirement bought an 08 rag top, followed by a 15 EB Hard top, In 18 i bought a low low mileage 05 GT rag with a stick.. The car had not been properly stored. That led to rodent issues !! Electrical nightmare. Lots of bucks !! The stick wasn't kind to my aging knees.. The 05 went to a long term dedicated Mustang guy. He loves it .. Today my garage tenant is a sweet 19 Camaro RS rag 6yl Auto. I just might take it out of hibernation this weekend. The Mustang will always hold a place in my heart.. Kudos to Ford for keeping it alive . I refuse to refer to the fake one by that storied name .
  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.
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