Tesla's US Tax Credit Set To Come To An End

Doris Richards
July 13, 2018

On Tesla's website, under its electric vehicle incentives page, it shows that as of January 1, the federal tax credit for anyone who purchases a new Model S, X or 3 will be reduced to $3,750 from $7,500.

Automakers are pouring billions of dollars into developing electric auto models for China. The credit is cut in half for vehicles delivered January 1 - June 30, 2019, then slashed again to $1,875 for deliveries from July 1 - December 31. Up to the 200,000 mark, the full federal tax credit of $7,500 is applied.

Earlier this year, amid concerns they could miss the federal tax break, some potential buyers of Tesla's long-delayed Model 3 sedan began seeking alternatives, including GM's Bolt, according to postings by would-be Tesla buyers on websites and interviews with GM dealers. However, the company has until now declined to comment on just how close to that threshold it has got.

It's another "first" for the automaker, but perhaps not one it would like. Owners will be able to claim the full $7,500 federal tax credit for vehicles delivered through December 31, 2018.

While tax credits have helped boost electric-vehicle demand in the US, they remain only 1.1percent of the market. The new vehicle identification registrations come at a time when Tesla is actively pushing its deliveries for the Model 3.

What's critical is that this isn't based on the point at which you order - or reserve - a Tesla, but when you actually take delivery of it. It's a hurdle that's heavily dependent on the specific configuration you want to order.

Currently, the lowest-priced version of the Model 3 on offer is a rear-wheel-drive edition equipped with a premium interior and long-range (310-mile) battery pack for $43,000, with deliveries estimated in three to five months.

With the release of configurator emails for reservation holders and the rollout of programs such as test drives in selected stores, as well as a new 5-minute "Sign & Drive" delivery system, Tesla appears to have stopped anti-selling the Model 3.

The Model 3, which starts at $35,000, was created to broaden Tesla's customer base beyond the luxury segment and accelerate the pace of electric-vehicle adoption. That will mean the federal tax incentive for those new owners will be halved - and could, indeed, offset some of the appeal of not spending $9k on the bigger battery. However, additional purchase incentives are available in a dozen states.

How this might impact Tesla purchases remains to be seen.

The clock is ticking for Tesla customers looking for incentives on their auto purchase. The Model 3 missing out on unlimited inclusive Supercharger access, for instance, was one disappointment for buyers of the most affordable auto; now, the dwindling tax credit could further disappoint.

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