Tesla To Sell 200,000th EV In U.S. In 2018, Tax Credit Phase Out Follows

Tesla

APR 2 2018 BY STEVEN LOVEDAY 70

As Tesla ramps up production of its highly popular Model 3, it moves ever closer and quicker toward the sunset of the U.S. federal EV tax credit.

Tesla reported in a recent SEC filing that it will potentially sell its 200,000th vehicle in the U.S. at some point in 2018. This comes as no surprise to anyone who follows the automaker and/or the segment. The automaker shared:

“Under current regulations, a $7,500 federal tax credit available in the U.S. for the purchase of qualified electric vehicles with at least 17 kWh of battery capacity, such as our vehicles, will begin to phase out over time with respect to any vehicles delivered in the second calendar quarter following the quarter in which we deliver our 200,000th qualifying vehicle in the U.S. We currently expect such 200,000th qualifying delivery to occur at some point during 2018.”

RELATED: These 19 Plug-In Electric Cars Qualify For Full $7,500 Tax Credit

Red Tesla Model 3 LA Auto Show

Tesla Model 3 at LA Auto Show

When the automaker reaches this milestone, the federal tax credit will enter into its sunset phase, meaning that the $7,500 credit will only last for a specified period of time and then begin to diminish. During the time that the rebate still exists (at least in some value), Tesla has plans to release its $35,000 base Model 3 and the dual-motor, all-wheel-drive performance variant.

If the automaker holds true to its word, the $35,000 base Model 3 will arrive prior to the end of 2018, and there’s a chance (albeit very small) that some people will be able to take advantage of the full credit on that version.

According to Automotive News, Tesla delivered 103,082 vehicles in 2017. Model 3 deliveries started in July and have been experiencing a very slow ramp-up since then. However, the automaker aims to be producing some 2,500 per week by Q2 and 5,000 per week in Q3. Regardless of whether or not guidance is achieved on time, surpassing the threshold during this calendar year is inevitable.

Some believe that the end of the tax credit will slow EV adoption, while others disagree. Most people that reserved a Tesla Model 3 were well aware that the automaker would hit the number soon. In fact, if the Silicon Valley electric car maker was on target with Model 3 production projections, the magic number would have already been exceeded. What many people didn’t know ahead of time was that Tesla would not offer the $35,000 base model initially, or anytime soon thereafter.

TESLA SALES – MONTHLY PLUG-IN SALES SCORECARD

Although Tesla, followed by GM and Nissan will hit the sunset number soon enough, several other automakers are just bringing electric cars to market. This means that those companies will be able to benefit from the credit far after the early adopters no longer can. That is, as long as the U.S. government allows the credit to continue as it stands. Tesla also sells about just as many vehicles abroad as it does in the U.S., despite some significant price hikes and taxes. The U.S. federal tax credit will have no negative impact on Tesla sales outside of the U.S.

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Source: Automotive News

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70 Comments on "Tesla To Sell 200,000th EV In U.S. In 2018, Tax Credit Phase Out Follows"

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Though this clearly is a huge matter for US citizens, don’t forget that there are far less or no EV incentives at all in most other parts of the world, combined with a large percentage of sales tax (like 20% here in my country) and generally higher prices. So that tax credit shouldn’t be such a big deal(breaker) as it is.

R.S

It is a big deal, because it’s so high. If you win the lottery and someone else looses your ticket, would you say:

“Well it was so much money anyways, most people win nothing, or way less. So this really isn’t an issue at all.”

The good thing is that the full incentives will continue for halve a year (if timed right) and then there will be halve a year with 50% and another half with 25%. Which is still a lot of money.

ffbj

It’s true, and instead of saying that it will extend for some time., as the article reads, they should be more specific as you have been.
So on July 1st if Tesla hits the 200k mark then the next two quarters are full rebates, etc…as you say.

darth

I predict that Tesla will lower the base model M3 price by exactly $3,500 when they hit the limit, but leave the other models the same. That would get them very good customer loyalty at minimal cost. I’m sure they are forecasting their battery costs to drop in line with the tax credit expiring, so it won’t be that much of a hit.

Mark Vanderhelm

No chance.

Ziv

I agree with Mark. Tesla can’t reduce the price of the M3 by $3500 because they are going to have a hard time making a profit at the $35,000 price they promised. The M3 is a great car, and it costs a lot more money to build a great car like the M3 rather than the Bolt. Just sit in both of them and look and feel the difference. GM can sell the Bolt for $31,000 with a small profit because they put cheap seats and cheap interior material into the Bolt.
You get what you pay for.

They can’t even make money on $49k Model 3s, let alone the mythical $35k base 3 or your proposed 31.5k 3. Price reduction = no chance in hell.

Vexar

You obviously don’t listen to their quarterly earnings reports. 5x the margin of a Ford. Pay attention to the details and don’t assume corporate finance is as simple as your 1040EZ.

SJC

Margin does not matter if you can not deliver enough.

Tom

You need to go back and read their reports again. That is NOT what it says at all. That’s a fanciful comparison of Ford’s net vs a mythical Tesla gross margin for one. And for two, they do the accounting differently….as in Tesla does not adhere to standard industry accounting practices involving cost accounting.

Mint

It is true currently are not making money on it, but we’re going to hold you to your claim that they “can’t”.

Recoil

Hey mad bro please show us where they are not making money on their 49k model 3? Oh that’s right you can’t because unlike the chevy bolt the model 3 actually makes money and isn’t just a compliance car.

dan

Not gonna happen. Battery costs, especially critical inputs like Cobalt have skyrocketed in the past year. I would imagine that the 49k model is struggling to get above water, cost wise. I wouldn’t be surprised if that isn’t a big reason for slowing down the ramp up out of production he’ll. The model S/X have healthy margins and aren’t affected if one or two input cost goes up 25 or 50%. The model 3 economics were a stretch to begin with and there is no buffer. If you look at similarly priced cars like the Bolt, they can afford to lose money because they have capped production at points where such spikes in costs won’t tank the company as a whole. The model 3 production is already comparable to the rest of Tesla’s profitable production. Where would they go for shelter if they start a fire on their model 3 balance sheet? The only way to ensure safety is to hold average price at a reasonable level as long as possible.

William

I wonder where that “hold”, on the Tesla Model 3 “average price” ($49k) will be held at a “reasonable level”?

Once the profitable Tesla Model 3 production starts, surely the ICE OEM majors will want to start chipping away at any and all Tesla profit centers. I think Toyota and VW are playing the 2 year waiting game, as Tesla Fed credits start to approach 25%.

zzzzzzzzzz

“The model S/X have healthy margins”

Negative -16.68% net profit margin is no way healthy 😉 TSLA gross margin is just make-up number, by moving sales and other costs elsewhere in profit/loss statement to satisfy CEO compensation requirements, and has no relation to gross margin used by other automakers.

Model 3 is make it or break it for Tesla, as in theory they may hope to break even at high production scale. It doesn’t look like they are making through so far, whatever the fanboys are screaming and hating.

dan

I’m not remotely a Tesla fanboy – unlikely to ever buy one but basic math is basic math and I can try to guess their next move. I don’t think the decision to make the next additional unit is based on net profit margin. Net profit/loss is what happens after the fact based on your decisions through the year. Tesla’s model 3 factory costs are fixed and are the primary reason for the net loss. The battery costs on the other hand are per unit. That means that even if they have sunk costs into a model 3 factory, the rational thing to do if a unit model 3 is loss making is to ramp an additional model S which is profitable at the unit level.

Get Real

More serial-BS from serial anti-Tesla trolls, shills and shorters MadBro, dan with a very little d, and of course fool cell/Big Oil shill zzzzzz.

Tesla enjoys very healthy margins on its well established Models S and X.

Once the Model 3 ramp gets into full production, it to will have very healthy margins going forward based on their volume.

Tesla Motors paper losses occur because it is in a heavy growth phase and building assets that will give it a competitive advantage and allow it to dominate the mid-high end compelling PEV market through lower costs through batteries and electronics.

This alone ensures they will be fully competitive even after their credits expire and don’t forget they have about 20 billion in orders right now and are diversified into compelling DCFC network, large and small scale battery storage systems and solar too in an ecosystem approach.

I challenge all you shills, shorters and haters to double down and put all your assets into shorting Tesla which they won’t because they are complete Trump-level doublespeak cowards.

dan

Hey fanboi, did you even read my comment? I point out the profitability of the S and the X.

Get Real

Yeah I read your comments.

The reason the Models S and X are profitable is because they amortized their production costs over many units.

In order to get the Model 3 profitable they have to do the same which means selling more units, not less!

Now of course Tesla would prefer to sell someone an more expensive S or X then a 3 but they are in different segments for a reason.

TwoVolts

He stopped reading after he saw your opening six words. If you could just go back and simply edit your post to remove the 2nd and 3rd words, all will be forgiven. 😊

Nix

Your math ASSumes that 100% of everything Tesla has spent has all been to build and sell just Model S and Model X cars.

Obviously that is false.

You are making the same mistake as the folks who said that it cost GM $100,000 dollars to build each Volt.

Empire State

I think your prediction may be an option among the most simplistic available to Tesla, but I do think that Tesla is likely to manage the product mix and make marketing choices so as to mitigate the effect strength of the step-change in tax subsidy. Tesla has a more sophisticated marketing approach than simply being heavy on the advertising and promotion, a focus that would normally lead to a simple price reduction.

ffbj

Doubtful. For one reason. Why would they do such a thing? The Model 3 has huge demand, they won’t be lowering the price.

Windbourne

Bad prediction. Margin is too low to allow it.

Texas FFE

I have been tracking manufacturer plugin sales month to month. As of February 1, 2018, Tesla sales were sitting at 164,946 where as GM plugin sales were sitting at 162,092. Tesla sold 50,147 cars in 2017 and GM sold 43,893 sold both manufactures should reach the 200,000 mark by end of the year with Tesla reaching it maybe a month or two earlier.

We have yet another article that disrespects Ford. Nissan has only sold 105,284 plugins but Ford is close behind at 98,695 plugin sales. Nissan achieved these numbers with just one model, the Leaf, whereas Ford has sold four different plugins since 2010, the Transit Connect EV, the Fusion Energi, the C-Max Energi and the Focus Electric.

Toyota and BMW are following further back at 69,671 and 55,686 sales respectively. Ford and Nissan currently appear to be constraining production of plugins in the United States. I would not be surprised if Ford and Nissan continue to constrain plugin product through 2018 and then flood the market with attractive plugins after Tesla and GM lose the federal tax credit with Toyota and BMW following a similar tactic later on.

dan

The way these subsidies are meant to work is to spur innovation, not distribute funds in an equal opportunity fashion to all automakers. Don’t be surprised if the political will to offer subsidies vanishes when the two major US based manufacturers hit their 200k limit. This program will be toast then. There is no benefit to Ford from holding back.

Texas FFE

I think Toyota, Ford, Nissan and BMW all have enough political clout to keep the tax credit going a few more years.

BenG

Looks like a good bet to me as well.

ffbj

Considering that this already happened when noises, howls of anguish, where made about scotching the subsidy, I would agree.

Spider-Dan

I don’t think it’s an either/or scenario. I think the credit will just be changed to something like “the next 500k cars regardless of automaker” instead of each automaker getting its own 200k.

There is no scenario where the U.S. government will be putting cash on the hood of foreign cars while leaving domestic automakers to twist in the wind.

Nix

I have zero expectation in the current political climate of there being any extension or expansion of any green incentive at the federal level.

States will step up where the feds will fail. The same way states have raised gas taxes, while feds haven’t since 1994.

David S.

Thanks for sharing the numbers! I didn’t realize Ford EV sales in the US were so close to Nissan’s

F150 Brian

Unless Model 3 production hell stikes again, or Tesla redirects a serious number of vehicles to markets outside of the US, they will hit 200,000 *BEFORE* the end of June.

Hmmm, will be interesting to see how they manage that.

ItsNotAboutTheMoney

2018Q2 Shareholder Letter:

“So, you know how, umm, US sales are always somewhat higher in month three? Well, we, er, had some stuff, just stuff, vacation, sickness, whatever it was, happen in June and some people who were covering made some mistakes and put cars on the wrong trains, and whaddayouknow, a whole bunch of cars ended up in Canada instead. We were going to have a big party and everything to celebrate hitting 200,000 US sales, but we only managed to reach 199,999. Exactly 199,999. No more, no less. Terrible shame. Won’t happen again, we promise. Definitely not in Q3 or Q4 anyway.”

ffbj

Pretty funny.

Nix

itsnot — you joke, but Canadian reservation holders have seen their delivery date get moved UP. Maybe as early as mid-2018.

https://electrek.co/2018/02/08/tesla-model-3-canada/

They very well might push units to Canada in Q2.

Tom

You beat me to it. Canada is the relief valve for June it would seem.

Ziv
Brian, by Monday morning we will know how Tesla did in March. My money is that they won’t have sold enough cars in the US to preclude selling the 200,000’th car in July. I bet they shift S and X sales overseas at a slightly higher pace than they have to date, and thereby push the sunset of the full credit from October 1, 2018 to January 1, 2019. If they hadn’t had the slow ramp up on the 3 it wouldn’t be an option, but give the facts on the ground to day, they have to sell 36,000 cars to hit the ceiling, approximately, over 4 months. And March is going to be fairly dismal, with maybe 3100 M3’s sold. And they have sold just 3500 S and X’s in the US over the past 2 months. Add in the fact that the email seems to indicate that they are shifting workers from S and X production to the 3 to get the daily production up to 300 per day? There is no way that Tesla can’t profitably shift a few more S and X sales overseas to avoid going over 36,000 US sales over the next 4 months,… Read more »
Will

Except for the ford focus electric the rest of fords plug in lineup dont get the full tax credit right.so Toyota and Ford are in prime position if they like to make an afforable ev 25k-35k and eat everyone alive

BenG

A lower tax credit like $3500 for a CMax plugin sale still counts as a full 1 sale toward the 200,000 threshold when the credit phaseout countdown starts.

Texas FFE

As a side note, as of February 1st there have been 105,284 Nissan Leafs sold, 25,053 Chevrolet Bolt EVs, 8,682 Ford Focus Electrics and 3,647 Tesla Model 3s. With all the Model 3 pre-orders sales of the Model 3 should surpass sales of the other models but when? Sales of the Model 3 should surpass sales of the FFE in a month or two, sales of the Bolt EV sometime this summer and sales of the Leaf maybe late this year of early next year.

Tim Kulogo

We’ll bring EV’s to the masses by providing an easy ride for low volume manufactures…

Roy_H
“If the automaker holds true to its word, the $35,000 base Model 3 will arrive prior to the end of 2018, and there’s a chance (albeit very small) that some people will be able to take advantage of the full credit on that version.” I think that most if not all Model 3 first day purchasers will receive the full credit. Elon has stated that US sales will be controlled to maximize tax benefits, I do not yet know how, but there are viable options including selling more outside the US (to Canada and Europe) to push the 200k USA sale into the start of a Quarter. They also want to make sure that they will be able to meet their 5k/wk target. That means they will produce 5k x 13 weeks = 65k. This is what I think will happen if they can reach their 5k/wk by April, but if not, and they decide to stretch the 200k boundary to June, then they will stock pile some cars for delivery and have production above 5k/wk so more like 100k early buyers would qualify for the credit. It will be interesting to watch and see if Tesla curtails US sales… Read more »
Roy_H

Oops! I calculated production for only 1 quarter but the benefit is for 2 quarters, so if 200k reached in April, first 130k buyers qualify for full tax benefit and if it starts in July, then 200k+ buyers.

Scott Franco

Does anyone know how you PROVE your car meets the requirements for the tax rebate? The VIN number?

The Feds are dragging their feet on my Bolt application. I’ll expect worse on the M3.

ItsNotAboutTheMoney

The Feds are dragging their feet on everybody.
The 8936 won’t be finalized until the middle of March so they might not process a return using the 2016 form until it’s all done.

Strictly, the manufacturers warrant that it meets the requirements.

Manny

Does any know…?

I purchase tesla #200,000 I am eligible for $7,500 federal tax credit , because the IRS will know my exact purchase number, tesla 200,000 etc?

Or is it.

First come first serve , the first 200,000 tesla owners who file their taxes first will be eligible?

In other words how does the irs know my particular purchase is 200,000 and not 300,000 to qualify?

Adam H.

The credit is not limited by total number of vehicle sales, only that

“The…credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States”

In other words, if Tesla sells vehicle number 200,000 in the United States on or after July 1st 2018, the credit phase out will not take effect until January 1st of 2019.

“…vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period.”

Supposing Tesla does not hit 200,000 sales until after 2018 Q3 begins, 2019 Q1 and 2019 Q2 will be 50% credit regardless of sales. 2019 Q3 and 2019 Q4 will be 25%.

Tesla has a long way to go until all of their credits are gone.

Adam H.

I’m going to go out of a limb and guess that Tesla will carefully manage US deliveries prior to July 1 in order to not break 200,000 unit sales.

Here’s some back of napkin math:
170,000 Tesla U.S. Sales as of Feb 1 2018
30,000 Units left until credit phaseout
Unit Sales of 6000/Month Feb-June will put Tesla right at phaseout

Current Model 3 Production – 1000/week
Model S/X Productions – 2000/week total

Considering worldwide demand, Tesla can easily allocate units to foreign markets while still selling in the U.S. and carefully managing total sales.

During the last conference call, Musk stated Model 3 production will be around 2500 cars per week at the end of Q1 and 5000 cars per week at the end of Q2. This timeline pairs perfectly with 200,000 U.S. unit sales being reached at the beginning of Q3.

Hope this analysis is helpful.

Ziv

Adam, I think Tesla had sold almost 165,000 cars on Feb 1st, so they will have about 35,000 left before they cross the line, so they will be able to sell a slightly more healthy 7,000 per month over the 5 month period. I think we are going to see a slow ramp up for the 3, and for all the right reasons. If they don’t sell 200k until July 2nd or 3rd, that means they have the full credit for ALL of 2018, and the half credit for the first half of 2019. That would be a huge benefit to Tesla.

Nix

On top of the excellent info already posted, the IRS doesn’t actually track how many people actually take the tax credit for each manufacturer. They only track how many cars each car company builds that are ELIGIBLE for the tax incentive.

If one company sells 200,000 EV’s and only 100,000 people actually file for the tax incentive, that counts the same as another company where all 200,000 people file for the incentive.

Larry

It’s between the manufacturer and the IRS to determine the date of sale of the 200,000th car and thus the quarter in which that occurs. Subsequent application of the rules will key off only the date of purchase, so that is all you will need to prove to the IRS, I would assume.

(⌐■_■) Trollnonymous

You know what the sh1tty side of this is?
The slacker/laggard/kicking and screaming manufacturers (VW, Ford, Mazda et al) will still benefit from the tax credit even though the top few pioneered their way to this point.

There should’ve been some type of incentive for the manufacturers to achieve this.
Maybe a Gold, Silver or Bronze tier then when all 3 have achieved, either restart everyone back to 0 and go at it again or if warranted, cut everyone off.

Perhaps. But when people realize the charging network sucks and unusable most times they need thanks to free chargers, they will better appreciate Tesla. The best sales pitch for Tesla was driving non-Tesla EV.

TwoVolts

+100. Tesla is the only EV maker that fully understands the importance of a practical charging network to the car’s value proposition.

David

Its affected our decision. I couldn’t wait until 2019 and didn’t believe the SR would happen in 2019. Bought a new ICE. Cancelled Model 3 reservation this week.

You people are not canceling your reservations fast enough. Please cancel your Tesla 3 reservation NOW and convince all your friends to cancel. You can re-order after I get mine.

Mister G

Yes cancel cancel cancel to move me up in the queue LOL CONNECT THE DOTS ON CLEAN AIR WAKE UP FOLKS

Jeff Songster

Agree with Trollnonymous… stinks that the early pioneering companies get penalized in the long run. Would be better if they could let it go at 50 percent longer for them or something that would help. I am grateful that they had the credit to help pay for the batteries. Need to add more state benefits like perhaps exemption from registration fees for first 5 years of ownership… Raise the gas tax to pay for it.

Mister G

An increase of 5 cents per gallon would be good
Tax the POLLUTION

u_serious?

This rebate plan is a great example of rewarding the slackers in the game.

I say get rid of the rebates after the top 3 hit their mark.

Get Real

Actually what mental MadBro doesn’t want to admit is that GM doesn’t make a profit on the Bolt because of low volume.

Conversly, Tesla has some of the best margins per car in the business for the S and X and will too for the 3 woth volume despite what the shills, shoryers and haters pull out their posteriors to support their FUD.

Roy_H

As pointed out above, it is obvious now that Tesla will hit the 200k sales number July 2nd. The proof is in opening up sales in Canada to gain revenue without going over the 200k limit in the USA too soon.

Pushmi-Pullyu

“Under current regulations, a $7,500 federal tax credit… will begin to phase out over time with respect to any vehicles delivered in the second calendar quarter following the quarter in which we deliver our 200,000th qualifying vehicle in the U.S.”

Somehow I missed that in all the previous discussion: That the full (up to) $7500 tax break will still apply for two full quarters after the quarter in which Tesla passes the threshold of 200,000 U.S. sales, and will only start decreasing after that.

If WadeTyhon is right (and I think he is), and Tesla passes that milestone in the 2nd quarter this year, then the full tax rebate will remain in effect until the end of 2018. That’s better than I thought!

Go Tesla!

TwoVolts

It’s not quite that favorable. If Tesla hits 200,000 in 2nd quarter, the full credit is only available through the end of 3rd quarter – not the end of 2018.

See ‘Phaseout’ section at bottom:
https://www.fueleconomy.gov/feg/taxevb.shtml

Pushmi-Pullyu

ffbj said:

“Doubtful. For one reason. Why would they do such a thing? The Model 3 has huge demand, they won’t be lowering the price.”

Bingo! We have a winner.

Tesla certainly isn’t going to lower the price of the TM3 so long as demand greatly exceeds supply. That is basic supply-and-demand economics.

Pushmi-Pullyu

[The function of “Reply” to other comments seems disabled here, too.]

Nix said:

“…you joke, but Canadian reservation holders have seen their delivery date get moved UP. Maybe as early as mid-2018… They very well might push units to Canada in Q2.”

Yes, Tesla is sending some TM3 units to Canada, and if that has not already started, then it will soon. But according to WadeTyhon, Tesla will still pass the 200,000 milestone in Q2, despite a small percentage of the production going to Canada.

This of course isn’t verified fact, merely a projection, but Wade seems to have excellent sources for his figures, and I’m going to be quite surprised if he’s wrong.

See discussion at the InsideEVs forum here:

https://insideevsforum.com/community/index.php?threads/model-3-production-ramping-up.404/page-7#post-8750

heisenberghtfromouterspace

…just a thought…

I know it might sound crazy…

what would happen if the boring company (or any random newly founded company with a funny name) would suddenly start to produce Model 3 under licence of Tesla… would that make the boring company eligible for further 200000 incentives?

would be fun…