6 Automakers Closest To Losing The Federal Tax Credit

APR 8 2018 BY MARK KANE 67

This year, the first manufacturers will hit cumulative sales of 200,000 plug-in electric cars in the U.S.

Hitting 200,000 will trigger the phaseout period of the $7,500 federal tax credit.

Currently, all of the plug-ins vehicles sold in the U.S. are eligible for full federal tax credit of up to $7,500 (depending on battery capacity – see actual credit amount for each vehicle here).

But when a particular manufacturer sells 200,000 units, the full amount will be available through the end of that quarter and for the following quarter. Then, all new plug-ins from that manufacturer will be eligible for just 50% of the per-vehicle credit amount – for only two more quarters. After that, the credit diminishes even more until it’s eventually gone for that particular manufacturer.

As we explained in the past, this is how it all works.

“Each independent automaker’s eligible plug-in vehicles receive a federal credit (up to $7,500) federal credit – until the 200,000th plug-in is registered inside the US, when a countdown for phaseout of the credit begins.

At the time of the 200,000th sales, and so as not to disrupt/confuse those buying the EVs, that full $7,500 credit continues through the end of the current quarter and to the completion of the next quarter.  After this period ends the “phase-out” begins, meaning the credit is reduced to $3,750 for the next 6 months, then to $1,875 for the next 6 months before expiring completely.

During any part of the phase-out process (between sale #200,000 and the calendar expiry date), the OEM is free to BUILD AND SELL AS MANY EVS as they can/want, receiving the applicable incentive amount.”

And here’s the phaseout, as explained by the IRS:

The qualified plug-in electric drive motor vehicle 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 (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”).

Qualifying 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. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.

There are six manufacturers most advanced in progressing towards 200,000. In countdown order, all six are listed below.

6. BMW Group – 63,886 (63,110 BMW and 776 MINI)

 

5. Toyota – 74,643

 

4. Ford – 106,267

 

3. Nissan – 117,372

 

2. General Motors (GM) – 176,083 (172,938 Chevrolet and 3,145 Cadillac)

 

Blue Tesla Model 3

1.Tesla – 177,651 (estimated, excluding Tesla Roadster)

 

Automakers Closest To 200,000 Federal Tax Credit Limit – March 2018

Taking into consideration the numbers and pace of sales in the past months, Tesla should hit 200,000 first, in the second quarter of this year (probably July/Q3 though).

But, if Tesla understands the value of that $7,500 credit, then it will likely limit deliveries in June, in order to hit 200,000 in July, thus making use of three months of the $7,500 amount, instead of just a few days. This is why Tesla sales shouldn’t exceed 22,000 in the U.S. this quarter, compared to 17,980 in Q1.

General Motors should be second to the 200,000 level, some 3-6 months after Tesla.

It’s likely Nissan will be third, with the emergence of the new LEAF and sales showing a strong uptick in the past month.

After that, it’s not so clear which automakers will be next.

Top 15 FAQs on the Income Tax Credit for Plug-in Vehicles


Closing

We’ll update this list on a monthly basis as new sales figures come in. You can keep track of U.S. sales here and remember to check out our Compare EVs page for information such as federal tax credit amount, pricing, range and more.

*Eric Loveday contributed to this report

Categories: BMW, Chevrolet, Ford, Lists, Nissan, Tesla

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67 Comments on "6 Automakers Closest To Losing The Federal Tax Credit"

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Ron M
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Ron M

I don’t think there’s any possibility that Tesla will sell less than 22,000 vehicles this quarter.

TwoVolts
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TwoVolts

Unless they temporarily build inventory and focus on sales outside the US. I am fairly certain that all the automakers will be trying to ‘manage’ the timing of the phaseout.

Dan
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Dan

Agree, it’s more like there is no way they will reach 200k total US sales this quarter unless they are witless. It’s US deliveries that count towark 200k, nothing to do with production.

Assaf
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Assaf

I agree with Ron M. With all the hyper-focus on increasing Model 3 production (currently reported to be at a ~9k/month rate), and the America-first delivery policy, it will be *extremely* hard for them to avoid 22k, even if they try and divert to Canada as much as they can.
And that’s without counting Model S/X.

If they end the quarter in the 200,001-210,000 range, it will be yet another case of misplanning and ordinary-consumer (as opposed to rich people who could afford it anyway) neglect on behalf of Musk et al.

Bryan
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Bryan

Give me a break. Tesla is required by law to maximize profit for the investors(share holders). If the intentionally keep from selling to maximize the credit they could find themselves in big trouble with the SEC. It isn’t any big conspiracy theory. What wouldyou guys be doing if Musk’s estimate for ramp up had been on schedule? They would be over 200,000 already.

Dan
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Dan

They don’t need to “not sell” them. They can sell them outside of the US. There is a long waiting list for their products outside of the US.

SJC
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SJC

“required by law to maximize profit ”
Which law? Corporations are chartered in states.

Windbourne
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Windbourne

The best way to maximize profits is look long term, not short term.

Assaf
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Assaf

@Bryan do you mean we should give you a *tax* break? heh

Seriously, an extra quarter of full subsidies would cost Tesla almost nothing, and may allow the subsidies to cover several tens thousands additional Model 3, as a minimum.

It may make the difference between mass exodus from the waitlist, in particular of the more mainstream consumers (in terms of buying power) – and a far smaller exodus. Why would someone keep waiting for a $36-40k Model 3, when a similar range Bolt can be found at most dealerships for $22-25k after rebate? And that’s before the 220-mile Leaf shows up.

It will also buy Tesla time till the next Congress, where – for reasons going far beyond EV subsidies – one may hope smarter heads will dominate, and maybe a more rational ending formula for the subsidies will be found. Maybe even an extension.

How’s that for profits?

TwoVolts
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TwoVolts

+1

BroncoBet
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BroncoBet

Tesla withholding sales to game the rebate would increase revenue to shareholders not decrease it.Tesla pays no mind whatsoever to the sec and ignores many sec letters and complaints.Tesla kinship S and X overseas and 3 to Canada,and they can fill parking lots with cars to wait for July 1st. Right now production is set for the 3 anyway and will take time to resume, they have always been very good at getting government incentives,I’m sure they won’t change.
The important thing is to be at at least 5K a week after they hit 200K to give maximum rebates to buyers.

WadeTyhon
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WadeTyhon

Agreed…

Even being pessimistic on production, let’s say the Model 3 doesn’t average 2,000 units/week over the next 3 months…

Let’s say the Model 3 averages 1,500/week over the next 3 months.

If so, that alone would be 18,000 Model 3’s produced and ready to deliver in Q2.

Canadian deliveries will not be sufficient this quarter. Especially with AWD officially not coming until sometime in Q3.

Unless Tesla announces a push up for European deliveries for this quarter, or Tesla specifically announces they’re going to slow down Model 3 production for tax purposes, I don’t see a Q3 delay being possible.

Dan
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Dan

They can divert model x/s deliveries to Europe and aChina and delay some deliveries in the U.S. They only report their production and global deliveries, so reducing U.S. deliveries won’t have any financial impact.

Then they can sell as many as they want in Q3 and Q4.

WadeTyhon
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WadeTyhon

Always possible but no sign of this happening (yet). In fact in Q1 European S/X sales are down more than US sales. (Although we don’t have all numbers for Europe in March yet. But it too seems to be down from 2017.)

If Model 3 production is at or near 2,000/week all this quarter, Tesla would have basically no wiggle room for S/X… every single S/X would need to be Euro or China-bound.

But seeing as how European S/X deliveries were delayed “4-6 months” in February just like US deliveries, it looks unlikely to me.

We will see, though! I would rather be wrong on this because I’m waiting on the SR Model 3. 🙂

jorey
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jorey

They will simply deviate supply to the EU or Candada

D
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D

You would have to be dumb to get a Tesla. Hit a fire truck, killed a human being, bankruptcy and caught on fire with a man trapped inside. Why would anyone buy these cars. People they don’t know how to make them. Please don’t buy them and put us all in danger, you or our children. Please buy smart!

Jayydeeee
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Jayydeeee

So an ICE car never did any of those things? Also there was never a Tesla that caught on fire with a person inside but that has happened with ICE cars

leafowner
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leafowner

I can’t see Tesla sitting on this — frankly with GM and Tesla getting phased out first — I can’t see how politicians who think “America first” will allow $$ to go to foreign brands and not the two leaders in EVs. The law is going to get modified…..and I think both Tesla and GM know this.

Tesla will be going balls out this quarter….

Jason
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Jason

While it would be great to get a rebate, too bad for you if that is the reason you reserved the Model 3.
The biggest interesting thing will be if the rebate continues into future years and BMW, MB, VW, etc. get advantage of it. That puts GM and Tesla at a distinct disadvantage just when the EV shift is starting to happen.
Of course, the Trump government talks tough on US manufacturing, but if this happens then US manufacturers (except Ford) will be hit hardest.

Joshua Burstyn
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Joshua Burstyn

Agreed. A sensical government would either raise the limits before phaseout, or remove EV rebates while removing oil and gas subsidies, leveling the playing field for all powertrains.

PHEVfan
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PHEVfan

“sensical” – that explains why we won’t be seeing either of your proposals come to fruition.

Mikael
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Mikael

Not limit deliveries. Diverting deliveries from the US to other countries.

WadeTyhon
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WadeTyhon
Here’s the problem… does any Model 3 reservation holder in Europe have a delivery estimate earlier than “late 2018” so far? In the entirety of Canada there are 6 service centers. In Mexico there is 1 service center. In the US there are about 80! That’s 8% the number of CN delivery locations to US. If Tesla averages 2,000/week production in the US this quarter, they will produce 24,000 Model 3’s. If Tesla allocated 8% of this production to Canada/Mexico, that would be 1,920 cars in Q2. How many cars could be delivered per day at these service centers? 10-15? It’s at least a 1 hour process bare minimum per car. Max sales (absolute max, best case scenario) might be 5,000 delivered in Q2 in Canada. But I think that is very unlikely considering the S and X currently sell ~3,500 a year *combined* in Canada. That’s also assuming Canadians don’t defer to wait for the AWD version coming in Q3. Intentionally limiting production would be a bad idea. So the only way for them to hit in Q3 is if they announce a push up of European deliveries to July or August. As far as I have seen this… Read more »
Judge
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So the $7500 is not claimed buy consumer until tax is filed in 2019, how will IRS know who is elegible if 200K limit is reached in less say 3Q 2018

TwoVolts
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TwoVolts

They will ask you to provide the make/model bought and the date of the sale – same as they currently require. They will use this info to determine the credit amount.

If I know the IRS, the straightforward credit calculation will probably involve a 25-page worksheet.

TwoVolts
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TwoVolts
Vexar
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Vexar

By VIN number is my guess. A little more detail, please InsideEVs! Maybe this is why they aren’t ordering VINs in larger batches? I would count in the fraction of the 2500 Roadsters built in on that tax credit. I am sure the IRS is doing just that!

Elon is quoted as saying “probably July” for Q2 production rate of 5k Model III’s per week. If you build a straight ramp from now until then, which is not Tesla-realistic, then that averages to 3500 a week over the quarter. Let’s not forget that second factory is coming online this quarter in Europe. Not counting the assembly factory in the Netherlands, of course. So, all-told, Tesla should be clearing this 200k figure for the US before any other manufacturer, and before Independence Day for sure. Will they sandbag to maximize the federal program? What has Elon said about the program in the past? It’s artificial. The market has to want EVs. The way I see it, the market does want them. The US somewhat less so.

BroncoBet
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BroncoBet

There is no second factory in Eu not counting Netherlands.

Tom
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Tom

Finally!@!!!

fasterthanonecanimagine
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fasterthanonecanimagine

Somebody wrote in a comment (different article) that not all Teslas sold in the U.S. were used for the tax credit i.e. those sold to leasing companies (or was it car rental companies?). If this is correct, Tesla is possibly further away from the 200’000 threshold than assumed.

Ziv
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Ziv

The $7500 tax credit is basically free money, if the buyer doesn’t demand it, the leasing bank does. And the the number is for deliveries of “qualifying vehicles” so even if you altruistically don’t claim the credit, the vehicle still counts towards the 200,000 vehicle limit.

fasterthanonecanimagine
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fasterthanonecanimagine

Couldn’t Tesla just buy a small start-up car maker (or buy the option to purchase it later), and license Model 3 to them? This company could sell another 200’000 Teslas (maybe under their own brand). Would this possibly work or would it be illegal? I mean if tesla delivered parts (e.g. powertrain, battery etc.) to Volvo, Volvo could sell 200’000 cars in the U.S. under the current tax credit scheme. The ‘Volvo’ cars could still be assembled in the Gigafactory.

Tom
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Tom

Question: Is Hyundai considered the same manufacturer as Kia? How close does a ‘joint venture’ type situation need to be before the IRS considers them just brands of the same company? Nissan/Mitsubishi? From the wiki:
“As of December 2015, the Kia Motor Corporation is minority owned by Hyundai, which owns a 33.88% stake valued at just over $6 billion USD. Kia in turn is a minority owner of more than twenty Hyundai subsidiaries ranging from 4.9% up to 45.37% totaling more than $8.3 billion USD.”

PHEVfan
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PHEVfan

At worst it would have to be >50% ownership to be considered part of the same company, and even then it may not apply. It depends on the exact wording in the program to tell if a wholly owned subsidiary counts towards the total. I don’t know that wording, maybe someone else does.

Murrysville EV
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Murrysville EV

Guess I’ll continue holding out for the Kia Niro EV.

Tom
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Tom

So forecast then (pulled straight out of my nether regions) the mark of 200,000 is hit:
2018: Tesla, GM
2019: Possibly none. I presumed avg 4000 per month for Nissan Leaf and no other models introduced.
2020: Nissan, Toyota, BMW.
2021: Ford
2022: VW, Kia/Hyundai (assuming Kia/Hyundai counted together)

I leaf 2019 blank partly to point out the big gap here to the next ‘finisher’ after Tesla and GM.

I believe Kia/Hyundai will be left with the pricing power here and will dominate the economy end of the market in the US by 2022.

Tesla will NEVER produce a Model 3 for 35,000.

Discuss.

EVShopper
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EVShopper

Apparently according to the IRS Hyundai and Kia are counted separate. As well as all the VAG companies (VW, Porsche, Audi, etc)

http://evadoption.com/ev-sales/federal-ev-tax-credit-phase-out-tracker-by-automaker/

EVShopper
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EVShopper

From the IRS Qualified EV list 30D Index of Manufactures:
Index to Manufacturers
American Honda Motor Co., Inc.
AMP Electric Vehicles, Inc.
Audi of America, LLC
Azure Dynamics
BMW of North America
Boulder Electric Vehicles, Inc.
BYD Motors Inc
CODA Automotive
Electric Vehicles International
Electric Mobile Cars
FCA (Fiat Chrysler Automobiles) North America Holdings LLC
Fisker Automotive, Inc.
Ford Motor Company
General Motors Corporation
Hyundai
Karma
Kia Motors America, Inc.
Mercedes-Benz USA, LLC
Mitsubishi Motors North America, Inc.
Nissan North America
Porsche Cars North America, Inc.
Smart USA Distributor LLC — (see Mercedes Benz)
Tesla
Think
Toyota Motor Sales
VIA Motors, Inc.
Volkswagen Group of America
Volvo Cars of North America LLC
Wheego Electric Cars, Inc.
Zenith Motors, Inc.

Tom
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Tom

CODA…now there’s a name not heard in awhile. But yes Kia and Hyundai are apparently different. As are VW and Audi.

That would imply Kia and Hyundai getting set up to dominate the economy end of this market because they will have a $7500 advantage for a virtual eternity in technology time.

Lou Grinzo
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Lou Grinzo
The best news for the EV market is that GM is high on the list. If the Feds let GM’s incentives start winding down while other companies are getting the full $7,500, that will get ugly. Also, I’ve been convinced for a while that the bizarre way this incentive was structured helps account for the foot dragging among car makers. My making it X cars per manufacturer to get money, the Feds created an incentive for companies to delay until the early EV proponents (Tesla, GM, Nissan) no longer got assistance. If the Feds did the most obvious and simplistic thing — re-upped the incentives for another Y cars per manufacturer (NOT how I would do it, to be clear), or better yet, simply renewed the incentives for Z years with no company quotas, then I would expect companies like Toyota and Honda to accelerate their visible EV efforts. They’d see that the combination of lower battery prices and the continued incentives could help their competition make money by selling EVs and hurt them by not competing. (By “visible efforts” above I’m saying that I suspect they’re doing a lot more behind the scenes than we know. Does anyone think,… Read more »
Vexar
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Vexar

You gotta be kidding me. How much does this country have to bail out General Motors? No, no more special treatment for the union-first Motown sacred cow. Let the market decide who wins. If it is Kia, Nissan, or Hyundai who comes in and steals market share from Generic Motors, well, it’s not like this hasn’t happened before. Remember the Carter years and the oil crisis? Motown whined that they couldn’t make more fuel efficient vehicles, that it wasn’t what customers wanted.

And then they did make what the market wanted, and they made them.

GM should have failed a long, long time ago and been replaced. If they can’t hack it in the EV market, I don’t owe them anything, as a buyer or as a taxpayer.

Clive
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Clive

I agree no more special treatment.

TwoVolts
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TwoVolts

Yes. We should punish domestic automakers because GM was poorly managed in the 1970’s (the Carter years). Brilliant!

TwoVolts
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TwoVolts

Vexar,
Characterizing a restructuring of the tax credit to not punish the early adopters as ‘special treatment’ for GM is silly.

I can see a scenario in the next year in which the US economy has a significant recession – possibly beginning this fall. Tesla will be out of tax credits in 2019. Is there a potential for Tesla to be in trouble as early as 2019 in such a scenario? Maybe.

If that scenario plays out and Tesla suddenly finds itself on the brink, you can expect to read the following from Tesla detractors and Koch brother trolls alike:
“Tesla should have failed a long, long time ago and been replaced. If they can’t hack it in the EV market, I don’t owe them anything, as a buyer or as a taxpayer.”

EVShopper
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EVShopper

Mary Barra should make the case that if VAG group is counted as separate manufacturers, then the separate GM brands should each get 200,000 EVs toward the credit. So Chevy, Buick, Cadillac, and GMC.

Clive
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Clive

Like Nissan & Mitsubishi now. LeafTech, different name.

When Nissan runs out, I am shifting over to Mitsubishi.

LOL

TwoVolts
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TwoVolts

Not likely to succeed – but you bring up an interesting point.

Clive
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Clive

They are apart if the same alliance now, so its a given!

Ron M
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Ron M

Tesla will exceed 200,000 total US EV sales this quarter and will have two more quarters of a full credit. This means that December when sales for EV’s are typically the highest Tesla will sell a record amount and then January when sales are slower the smaller credit will begin.
Tesla has no reason to want to slow sales down, not even for a tax credit.

Dan
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Dan

If they exceed 200K in Q2, then 7500 credit is only available in Q3, and not in Q4

Alonso Perez
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Alonso Perez

Yep. Tesla will sell their US car 199,999 by end of Q2. They will ship to foreign countries, or store, any production excess.

Anything else would be idiocy. I just hope nobody at Tesla makes a mistake in accounting for cars sold in the US.

Vexar
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Vexar

Don’t bank on this, Alonso. Their investors are more interested in larger sales numbers than the consumers are about tax breaks. Sometimes, you have to take from one to give to the other.

Richard Giddens
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Richard Giddens

Please urge your Congressional Representitives to support an immediate extension of the tax rebate—-lower priced cleaner energy for transport puts money back into American’s purses and wallets, so it’s good win win win for all.

Windbourne
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Windbourne

How about killing the credit for all?

Murrysville EV
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Murrysville EV

After 8 years of subsidies, it’s time for EV mfrs to begin standing on their own.

Also, removal of the subsidy would help quiet the Tesla/EV haters.

BroncoBet
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BroncoBet

No,everyone crows about how ICE is finished and EV’s are exploding, if that is the case the rebates did their job and no extension and waste of money is needed.

Roy_H
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Roy_H

I think the number for Tesla is wrong. Must add 1900 for Tesla Roadster 1.

Adam H.
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Adam H.

Tesla will not sell more than 199,999 before July 1. Based on the way the law is written, I believe the credit continues for “two quarters after” the 200,000 threshold is met. Taxpayers should receive the full credit all the way through Q1 of 2019 in this case, giving Tesla essentially three quarters of sales at max production rates.

ziv
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ziv

No. If Tesla only sells 199,800 by the end of Q2, they will definitely sell 200k early in Q3 which means they will get the full credit until the end of Q4, so on January 1st 2019, the credit gets cut in half and people buying in Q1 and Q2 of 2019 will get a $3750 credit.

” The qualified plug-in electric drive motor vehicle 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…”

Adam H.
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Adam H.

You’re right, I wrote this on the tail end of an overnight shift, meant to say through Q4 2018.

Ziv
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Ziv

No worries. I imagine I am not the only one that wishes we had an edit feature. 😉

TwoVolts
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TwoVolts

Adam,
Perhaps you should read the article – including the example provided.

Adam H.
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Adam H.

I read the article and have read on this extensively. The law says “beginning with the SECOND calendar quarter AFTER the calendar quarter in which the in which at least 200,000…[emphasis added]”

The law and the IRA interpretation is not ambiguous. The law could say “the calendar quarter after the calendar quarter in which at least…” or “the second calendar quarter after the first calendar quarter in which at least…” Instead the law says “the second quarter after the calendar quarter in which at least.”

Q3 2018 – Tesla reaches sales limit
Q4 2018 – First calendar Q after limit reached
Q1 2019 – Second calendar Q after limit reached, one year phaseout begins

IANAL, but I don’t read this any other way.

TwoVolts
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TwoVolts

Yes. THIS makes sense. Phaseout would start in January in this example. Agreed.

Ron M
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Ron M

We’ve subsides fossil fuels for over 100 years and still do. Rick Perry just lost trying to get more subsides for Coal and Nuclear because they couldn’t compete with renewable. Yawn 😫

PHEVfan
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PHEVfan

The way this administration leans, it would be more likely to cancel the incentive altogether and hope Tesla dies and hope other makers drop EVs like a hot potato. Pruitt would be grinning from ear to ear, along with Perry. If they don’t accomplish that by Nov, then we’re likely safe.

BoltUp
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BoltUp

I just think its awesome that GM have sold that many plug in vehicles. With all the shade that’s thrown their way, its awesome to see they are actually leading in sales!
And yes, I’m a little bias having purchased a Bolt last month, though never thought I’d buy an American car!