Offbeat Tesla buyers hear clock ticking as $7,500 tax credit phases out

18:09  12 july  2018
18:09  12 july  2018 Source:   bloomberg.com

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The clock is officially ticking for Tesla buyers in the US to receive the full $ 7 , 500 federal tax credit for electric cars. Tesla delivered its 200,000th vehicle this month, the company confirmed to Jalopnik, which means a slow phase - out of the tax credit has begun.

Time is running out for buyers of some of the best-selling plug-in vehicles to get a $ 7 , 500 federal tax credit with their purchase. In an SEC filing early Friday, Tesla said it expects that it will hit the threshold of 200,000 U.S. sales at some time in 2018.

The clock is ticking for Tesla customers looking for incentives on their purchase.

The $7,500 federal tax credit for electric vehicles is set to start phasing out for the Model S, Model X, and Model 3 after Dec. 31, according to the company’s website. The Palo Alto, California-based carmaker is the first to trigger the reduced incentive in the U.S.

While tax credits have helped boost electric vehicle demand in the U.S., they remain only 1.1 percent of the market. The federal government support was designed to decline once manufacturers reach higher production levels and reduce their costs. Two quarters after a company reaches 200,000 sales in the U.S., the incentive is cut in half to $3,750. Two quarters later, the credit amount is reduced by half again, and it’s eliminated half a year later.

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When the sales clock hits 200,000, the tax credit doesn't make like Cinderella's chariot. Every car Tesla sells for the rest of that quarter, and the following quarter, qualifies its buyer for the full $ 7 , 500 . For the following six months, the rebate drops by half, to ,750.

One of the main concerns of some Tesla Model 3 reservation holders is the availability of the $ 7 , 500 federal tax credit that starts to phase out after Tesla hits 200,000 deliveries in the US. Tesla aims for the Model 3 to be competitive without the credit

A Tesla spokesman confirmed that the company delivered its 200,000th vehicle in the U.S. this month, so the full $7,500 tax credit will remain in place until Dec. 31. After that, the incentive starts ratcheting down and will be eliminated at the end of 2019, assuming there’s no change to the program.

Tesla increased second-quarter deliveries to Canada and had a significant number of vehicles in transit at the end of June, which may have reflected an effort to delay reaching the 200,000 level to “game the tax credit,” Loup Ventures analyst Gene Munster speculated on July 2.

“The good news is that there will be increased demand in the short term once consumers realize the credit will disappear,” Munster wrote. “On the other hand, future demand has been pulled to the present, so Tesla may face a headwind in 2019.”

The Model S sedan and Model X sport utility vehicle can each cost more than $100,000. The Model 3, billed as a more affordable car with a starting price of $35,000, is currently delivered only in more expensive versions. Chief Executive Officer Elon Musk said June 5 that the lower-priced version will probably start being sold around the end of this year.

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