With the beginning of a new quarter, today (October 1, 2019), the available amount of the federal tax credit for all new General Motors cars (Chevrolet/Cadillac) sold in the U.S. decreased from $3,750 to $1,875 (25% of the full $7,500).

The new, lowered amount will stay available for the next two quarters (through the end of March 2020), after which GM plug-ins will no longer get any federal tax credit.

The phase-out of the federal tax credit takes 1.5 year after a particular manufacturer achieves the first 200,000 sales, which in case of GM happened in Q3 2018.

Tesla was the first company to cross 200,000 sales and will lose the remaining $1,875 federal tax credit at the end of this year.

Federal Tax Credit amount - October 1, 2019


There are no signs that any other manufacturer will be able to reach 200,000 by the end of 2020, which will place Tesla and General Motors at a significant price disadvantage of up to $7,500 (in case of BEVs).

In such circumstances, the only way to compete with other manufacturer is to go very high volume to lower costs, which Tesla is doing in the premium segment. The task for GM, in a more mainstream segment of Chevrolet brand, is much more challenging.

The example above shows that the rules of federal tax credits, after the initial period of 200,000 sales, makes life harder for EV pioneering brands. It will not allow those companies to take advantage of delivering zero-emission products first.

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