Forbes Thinks Trump Administration Will Hasten Phase-Out Of EV Tax Credits, Negatively Impacting Tesla

Tesla Model 3


Tesla Model 3

Tesla Model 3

The price of the Model 3 will not be nearly as competitive without the EV tax rebate, especially when considering that the price will rise substantially when adding features.

The ultimate triumph of Tesla hinges heavily on the timeline and subsequent success of the upcoming Model 3.

Tesla stock is up at record highs as of late, and despite much skepticism and doubt surrounding the ridiculous Model 3 production schedule, it seems that Tesla is setting everything in place to move forward. Heck …  it may even come together on time.

Currently, Tesla’s Model S and Model X both qualify for the full $7,500 federal EV tax credit, and the Model 3 will qualify, just the same. However, not only is the timeline important for Tesla’s reputation and investor faith, but also it pays into how many Model 3 buyers will still be able to enjoy the credit.

The Model 3 is supposed to start at $35,000 prior to the rebate, and CEO Elon Musk has said that most Model 3 vehicles will likely average out around $42,000. With the rebate factored into these prices, the Model 3 will price out around or less than the national average vehicle price. But, if the rebate is no longer available, Tesla could see devastating sales, when compared to the ~400,000 reservations.

Trump and his Republican administration have made it clear that they don’t support incentive programs like that of the federal EV rebate. The administration is also considering doing away with the Environmental Protection Agency, so it’s clear the EVs aren’t of high importance.

Added to this, Republican Paul Ryan is now Speaker of the House. Years ago, when he was a presidential candidate, he called the EV tax credit, “money wasted on losers.” His goal at the time was to phase out the incentive entirely. Now, alongside Trump, he has the power to do just that. The pair, along with their party, don’t intend to keep the credit in the next budget cycle. They also don’t feel the need to support solar energy, another of Elon Musk’s “babies,” that came with Tesla’s recent acquisition of Solar City.

While Tesla is an American company, and is creating a plethora of U.S. jobs, and Musk is on two of Trump’s top councils at the moment, it may not be enough. It will surely be interesting to see how it all plays out.

Source: Forbes

Categories: General, Tesla

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87 Comments on "Forbes Thinks Trump Administration Will Hasten Phase-Out Of EV Tax Credits, Negatively Impacting Tesla"

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Tesla will have already known the writing was on the wall with this lot in charge, that won’t stop the EV juggernaut in Europe but it might slow it down for the US.

Alain , U R a Schmard guy..People who want Ev’s will buy But., at a slower pace , Thanks to President “Ducky” if he carries out what they predict he’ll do . I hope Musk Can pump some sense in “Ducky’s Head” & make Him somehow Understand That Re-newables Generate just as many if not more New Jobs as The Dirty Filthy 0il burners do. We need to stop Living in Caves .

For me, the EV Tax Credit is ONLY a bonus for buying an Tesla. I’m not buying a Model 3 to get a tax credit. It is important for some people, but has no bearing on my decision to purchase a Tesla. So, with or without a tax credit, I will be driving my new Tesla Model 3 early next year.

Amen. From the specs nd the initial release rides and info the car is worth the asking price without the credit. Just icing on the cake.

This May present a significant Problem for Bolt Sales . Without the Rebate that is lots of money for such a little car..

Far too much money for such à little car as the Bolt

This story failed to recognize that Trump is not your everyday republican. He is actually not a republican. He is conservative to the meaning of the word, not to the meaning of politics. So I believe he backs American innovation like electric cars.

That is the same impression I always got from Ducky . I hope we’re readying it right!

He has had 147 positions on 23 issues, pick which ever one you want.

Make sure you vote the Fossil Fuel Republicans out next time; Tell your family and friends to quite voting against their own best interest by electing Republicans.

The theory goes that the Model 3 (and similarly other >200mi range BEV and/or Volt-or-better PHEV) is aimed at the middle market. If you consider middle market to be 60-75th %-ile income bracket, many of these people won’t be much affected by the presence or absence of a $7500 ITC. Their effective tax rate isn’t high enough.

I’l go on record saying (again) that the price of Model 3, like the Bolt, will shock some prospective buyers when the reality of the features wish list becomes clear. I have also consistently said that even if they could get to 200k M3 production in FY2018 they’ll have to discount and incentivize to move them all. But the marginal influence of the ITC on the buy/no-buy decision will be small. Ergo Tesla isn’t going to be “negatively impacted” to any significant degree.

Besides, the effort required to eliminate the ITC is just too much work for Congress and they’re not going to get around to it.

New cars price always shocks some buyers.

Some people are unrealstic in expecting well equipped or fully loaded cars for the base price.

Model 3 will be no different than Mercedes C Class or BMW 3 Series in that respect.

realistic — “the effort required to eliminate the ITC is just too much work for Congress and they’re not going to get around to it.”

Actually, ending the $7500 federal tax incentive would be very easy if they want to do it. All they have to do is insert this text into any bill:

“Amendments relating to Energy Improvement and Extension Act of 2008.
(a) Amend by striking section 205.”

That’s it. With that amendment, tacked on to ANY bill passed by Congress, all the credits end as soon as the bill is signed by the President.

In this scenario, we would likely find out AFTER it was all a done deal. You don’t actually think they would write a stand-alone bill and put it up for an individual vote, do you?

The next “Must Pass” or the gov’t shuts down bill will be by April 28th, 2017. The last time they passed one of these “Must Pass” or the gov’t shuts down bills, they filled it completely full of pork. And that was back when the D’s still controlled the Senate and could stop amendments with a 51 vote majority. Now D’s cannot block amendments, their only option is to accept EVERYTHING that is stuffed into this bill, or vote to block the bill. That would shut down the gov’t. Here is a short list of the pork included in the last round: If R’s stuff it full of junk, including the line of legislation I posted, do you think the D’s would hinge shutting down the gov’t or not upon this program? Or would it be just one of a long list of items that are negotiated away in order to keep higher priority programs? You might not think it is a priority, but Trump’s head of the EPA transition team listed killing energy subsidies in his memo of Trump top priorities. And unless you gullible enough to believe they are talking about oil and gas subsidies, and… Read more »

Wouldn’t that be a “tax increase” and thereby violate the “never raise taxes” pledge to Grover Norquist many of them took?

Oh, I’m sure grover and the other climate denialists will find a way to rationalize this tax hike.

FYI — Trump hasn’t signed that pledge.

Would this even affect them?

According to this (guess), Tesla’s tax credits will run out by January 2018 anyways. So at very worst, this will affect about 5 months of sales, and those are the 5 months of lowest sales. Plus, the people who have the first 5 months of cars reserved are likely the biggest fans and probably won’t cancel their orders over $7500.

I doubt this will affect Tesla at all. And don’t forget that Musk wisely stayed on Trump’s technology board, and there’s a good chance that have some effect. Maybe the phase out will start in February 2018 or something.

The credit has done what it was enacted to do. It helped build the demand needed to build the economies of scale, not just for automotive battery production, but for all the electric intent parts. Keeping the credit in place after Tesla and GM see their credit cut in half in July or October of 2018 would be wasting money rewarding the laggards. I think Jay and Insideevs is betting that Tesla will see their credit cut in half in October of ’18. I would guess/hope sales are better and that the full credit runs out in July. But we are 6+ years in to the credit era. Seeing the credit go away in 9 months instead of in 18 months really won’t matter that much. I do hope, though, that Tesla gets the full credit for the final 6 months for as many cars as they can sell, which is the way the current law is designed. Trump likes winners and he wants to “put America first”. Tesla is a huge winner and they are All American in nearly every way. I don’t see Trump or a majority of the GOP stepping on Tesla’s toes on this. That and… Read more »

Take the $7.5k tax credit front loading away from a 36 month lease and you would add up to $200/month to the lease cost. Leases would drop fast.

The Model 3 is a huge key to the market since it could draw a premium and survive without incentives. If the tax credits go early, it would likely hamper Tesla by hurting their margins as many buyers would wait rather than spend the tax credit on a better car.

The Prius Prime could also survive at its price, assuming Toyota isn’t subsidizing it with ZEV credit money but a lot of other PEVs’ sales would take a beating if the prices don’t drop.

I think it likely that the week the tax credit goes away, the real world price of the Volt, the Bolt and the Leaf will drop a further $3000 from the prices they have already dropped to.
If the credit gets cut in half though, I would imagine that the price drop will be around $1500.
It won’t entirely replace the credit, but the price of electric cars will likely drop a noticeable amount.
Electric car makers are harvesting as much profit as they can while the credit is in place. Not surprisingly.
This isn’t written in stone by the powers above, but it is likely.

I agree with this. Smart marketers have priced in the break and prices will drop when the break is withdrawn. I have never known a marketer to knowingly leave any money on the table.

It depends. If immediate or retroactive elimination of the tax credit is announced, then yes. If the credit termination date is in the future relative to the announcement, EV prices will immediately INCREASE.

Usually only half the credit shows up in a lease, so it would be more like $100/month. Not that this isn’t significant.

But (1) the tax credits are being phased out and would/will be gone before anything happens on the tax side anyway; and (2) the ZEV credits have more dollars and CARB could make them worth even more.

Glad you posted this, or I would have. There’s not a lot of runway left for the Tesla Federal discount. However, it’s blue sky for several brands.

Even with subsidies gone and with no CARB waiver the model 3 will sell.

If i remember correctly tesla is predicted to run thru its allotment of tax incentives soon anyway.

IMO its too late to stop EVs now. Theres too many advantages to driving electric.

Right, it will hurt the Bolt, Volt and the Leaf, and the other car makers.

The Tesla T3 is already priced as if there were no credits.

The others will have to drop their price, they were taking the credit away from the buyer from the start.

Yes…EV acceleration is superior to ICE, I drive 2016 leaf but rented 2017 Cadillac XTS for a long distance trip and the acceleration in Cadillac was lagging, noisy, sputtered lol

Tesla is out of business. Your talking $21K in pure profit per car.

But it’s hard to see the ZEV credits going away. CARB has its waiver until 2025 and there is no statutory authority for revoking it.

The R’s control the Congress and Presidency. They can stuff changes into the statutes into any must-pass legislation and give themselves statutory authority.


Don’t you Tesla haters ever get tired of being wrong? Seriously?

That CARB has a waiver until 2025 or that there is no statutory authority for revoking the waiver? You need to be more specific about what you (mistakenly) think is wrong.

BTW it’s always so nice to hear from the paid Tesla troll.

Actually, removing the credit will mainly affect all the laggard OEMs that are only selling EVs for compliance reasons.

Without the credit, nobody is going to buy their mostly crappy EVs.

Since Tesla only sells compelling and higher end EVs then they will not be greatly affected and in fact might even benefit as the only game in town if the laggards drop their EV programs to build 2 MPG Trucks/SUVs.

Agreed get real,

Elimate the incentives and eliminate CAFE and CARB. just let Tesla have the whole EV market.

The big 3 don’t want to make EVs. Let them quit i dont care. Why give them any EV business anyway. Heck with them. I will give my money to a company that is serious about making EVs its stand alone business. The big 3 can pound sand

Tesla will be out of credits before anything gets done. On the other hand it might benefit if the program is restructured.

if the tax credits are gone. i will have to reconsider model 3 because chevy bolt looks bad for 37k

The Bolt, with no options at 37k looks better then a T3 with no options? Check your glasses.

I agree with John, George and Get Real, incentives are a burden to Tesla as soon as Tesla runs out and Lagging OEM’s still have theirs. Since folks are already counting on credits earned in 2017, the soonest this would likely take effect would be 2018 which would be at most a 3-4 month speed bump!

Just because people are counting on them, doesn’t mean they will get them. If congress and the president do indeed reform the tax code and illuminate the tax credits this year before 12/31/17, then no one will get any credits “earned” this year.

Congress has a number of options:

1) Kill it for all of 2017, retroactive back to purchases made Jan 1st. The IRS has an appeal process where a taxpayer could argue they made a transaction while relying up the existing tax code that they would not have otherwise made.

2) Kill it effective the day the President signs it into law.

3) Make it effective July 1st 2017. (July 1st is a common date for half-year enactments)

4) Make it effective as of Financial Year 2018. FY2017 begins Oct. 1st 2017.

5) They are writing the law, they can choose any date they want to make it effective from Jan 1 2017 to infinity or any day they choose in between.

OOOPS! I left out the obvious one that everybody already knows about:

6) End it after the current tax year, ending Dec 31st 2017.

Wow, typing way too fast today and I’m not paying attention.

This is wrong:

“Financial Year 2018. FY2017”

should be:

“Fiscal Year 2018. FY2018”

ZEV credits are the bigger issue. Right now those amount to $14K or pure profit per car. Those drop starting with the 2018 MY but CARB could make them more valuable if the federal government cut back on its subsidies.

Tax credit or not, EVs will not only survive, but flourish.

Do we have any accounts or tax attorneys who can chime in on whether or not the change to the incentive structure could be made to become effective in CY17? Not opinions, but facts.

There are several looming realities out there that are bigger than any changes to EPA, DOE, or IRS policies:

The poor economics of coal as compared to natural gas.

The increasing cost-competitiveness of wind and PV over both coal and natural gas.

The increasing cost-competitiveness and performance/everyday convenience advantages of EV’s.

Oil and gas well depletion, like rust, never sleeps.

“Trump and his Republican administration have made it clear that they don’t support incentive programs like that of the federal EV rebate.”

Where is this “clear”, and on what basis do we conclude they’ll kill them?

AFAIK, indications have been and remain pro-economy, pro-taxpayer, pro-borrow. Inside the Administration, the early word was all tax preference items would remain. I see nothing different, regarding PTC, ITC, or the EV tax-credit. Unlike MLP pipeline benefits, or Exxon’s carrier group security, the above go away in several years anyway. This Admin has better things to do, than try and find 60 Senators who’ll ride this pony.

“The pair, along with their party, don’t intend to keep the credit in the next budget cycle.”

Let’s assume for the moment that this is true and the budget for the 2018 federal fiscal year will not include the EV tax credit.

Does that mean that people who purchase EVs before September 30, 2017, will still get the tax credit when they file their 2017 federal tax return in 2018?

If yes, would that also mean people purchasing EVs after October 1, 2017 would NOT get the tax credit?

What is the timing here?

When it would end would be entirely up to how they decided to write the legislation that ends it. There is no automatic answer.

Truth to be said, if people would generally be in a position to have salaries at a higher level, then some 85-90% would opt to buy a Tesla vehicle. What I’m saying that world order of allowing salary ratios of 1::20 1:50 or 1:100 brings good to noone, except to those 10% of folks who actually care not about anything progressive. The key to Tesla-like firms’ survival lies in fair distribution and not in advances made by any party. Either the rotten building pillars crumble or we see no progress for another 1.000 years. One time incentive in a 100 years span is negligible.

So when does he scrap the tax benefits for fossil fuels? Fair is fair right?

Tax credits on oil, coal and natural gas production tend to stabilize the market and lessen price fluctuations. We get 80%+ of our electricity and even more of our gasoline from the sources you would cut the credits to.
I think your idea is penny wise and pound foolish.
Sometimes unintended consequences far outweigh the intended ones.

I thought Republicans believed in the free market. I guess that only applies when people who give you large campaign contributions are involved.

Also, there was an article in The Economist yesterday that said that eliminating the credits and fuel mandate will make US automakers more profitable in the short term but less competitive in the long run. We could be seeing the 70’s all over again.

“…eliminating the credits and fuel mandate will make US automakers more profitable in the short term but less competitive in the long run.”

Now there is Truth.

U.S. auto makers begging for “relief” from the mandates for higher fuel efficiency shows myopic, short-term thinking.

I find it truly depressing how commonplace it has become for businesses to prioritize short-term profits over long-term planning and sound business practices. That’s just as stupid, in the long run, as cutting funding for education and infrastructure.

Seems that true conservatives — those who prudently invest in the future — have become a dying breed.

Sometimes a cigar is just a cigar.
Even GOP’ers have to bow to reality and the harsh dictates of the real world.
Infrequently, perhaps, but not never.

Now we officially have a Cleantechnica Should/Would/Could Political puff piece on this site.
Steven, this is beneath you. Wait till it happens and then post.

My hope is that they will cut the tax credits in 2018, sometime around the time Tesla and GM run out. That will stick it to Honda and the other companies that didn’t take advantage of them when they had the chance.

+1 on that. Why reward the laggards?

my thoughts exactly

In my opinion, removing the EV tax credit will only make Tesla stronger. How you say? Tesla will have gotten to take full advantage of the tax credit for the entire duration were “late comers” with hopes of dropping a 200+ mile car and getting the credit as sort of a “subsidy” to lower the price below Tesla will be SOL.

Removing the EV tax credit will not help Tesla. Tesla sells electric vehicles. They might gain a larger share of the EV sales pie, but that pie will be much smaller with the $7500 credit gone.

Musk has already addressed this. If Republicans repeal the EV tax credit, which will be difficult given the filibuster, but even if they do, that hurts non-Tesla EV companies much more than Tesla as Tesla has nearly used up all of their EV credits. Basically, it means Tesla will have gotten nearly the full benefit (if not the whole thing, as it will likely take some time to do this and is not currently a priority) and other companies will miss out on most of the credits available. It would be a competitive advantage for Tesla which takes the credits from the competition just as Tesla is losing it naturally.

They can attach it to budget and filibuster will not apply. I would be surprised if they will not do it.

Tesla may reach 200k in around Q1 2018.
But phase out period then would be for the whole 2018 and a bit more without count limits. I don’t see how getting $7500 less per car, or raising effective price by $7500 (and so reducing US sales), can make Tesla stronger in 2018. You may theorize about less competition by 2019, but it is far away, and competition will be here anyway as it is not just about US market.

zzzzzzzzzzzz is sadly correct. And the gov’t is set to run out of funding on April 28th, 2017 unless the congress passes a funding bill. That funding bill can be filled full of as much pork and junk as R’s want, because they gained control of the Senate at the beginning of this year.

D’s will have to either agree to the pork, or the gov’t will shutdown.

More fear mongering.

It’s not fear mongering. It’s a wake up call for those out there that are planning on and expecting to get the tax credit and making their purchase decision based on that. It won’t kill the electric car, but it very much will slow the adoption of EVs by middle class folks. Low cost new EVs on the market will be delayed for many more years.

It is NOT “Forbes” that says this…just one of their many “contributors”. They’ve become more of an aggregator than publisher.

Providing insights and news about the global auto business.

Opinions expressed by Forbes Contributors are their own.

Government is still stuck in gridlock. Between crazy Orange Birther clown, the Freedumb caucus, moderates, establishment, and endless scandals….this is not going to get done.

But watching it unfold has amusement value.

Just dance your cares away at the Mar-a-Go!Go!
No need for curtailing carbon polluting vehicles. It’s all fake science.

Although there are projections that due to sea-levels rising the Mar-a-Go!-Go! will be affected:

Yes and Trump will ask for a billionaires bailout when sea level rise decreases coastal property values.

My other idea Mar-a-long-gone.

Build the sea wall to save Mara lago and add it to the deficit lol

I guess I’m in the minority in believing the credits staying in place is a good thing. I like Tesla and hope they do well, but am more interested in EV adoption overall and the lower pollution it can bring, so let the laggards join the party. If the credits being available in 2018+ help someone go with a PHEV or BEV vs comparable ICE vehicle that emits more pollution, great!

Who give a damn if they were late to the party? We all breathe the same air regardless.

Does not matter what the government does with the EV credit as long as they do the same for others getting the free money. Trump, congress and the rest can pretend the solar and EVs don’t matter but it does, % of how much are the question. In the end I bought a smart car EV, then a leaf, and now a tesla. Did the 7500 make a difference, no but it was nice to get because I still have to pay the monthly car loans. I just get more money later in the year. If you can afford the cars you will buy them, if you can’t you won’t. Buying a car or solar to save money never made sense to me even thought I have both. I look at the long term, better cars, nearly free power and saving or reducing my carbon footprint for the future. Saying all that people are smart to know the environment can’t survive all that we do to it via coal, oil, or natural gas mining. Our kids will make changes in the future and fight to undo all the wrongs we have don’t and people believe are right or they will… Read more »

Man who cares, I don’t count on any credits for a <$35k car that saves on average $1,200 a year on fuel and countless maintenance costs.

Forbes, for once, is probably correct. The Trump Administration has no shortage of Short Sighted Political Enablers pandering for the Fossil Fuel Industry. Russian, or otherwise.

As an EV owner / user, I’m also unhappy with States approving additional fees designed specifically to target consumers who buy BEVs.

Apply all vehicle fees uniformly based on millage and weigh), carbon tax the drivetrain being used, or just raise the gasoline / diesel taxes that already exist. Otherwise, it’s clearly monopolistic and likely going to be the subject of many class action lawsuits.

Cumulatively, these political moves are designed to make owning a BEV less appealing, and that’s not only SAD, but stupid pumping additional gigatons of carbon into the atmosphere and oceans that do not need to be there.

Elon will not let this happen. That’s why he has joined Trump’s team.

It is Elon vs. every single other member of Trump’s administration, and the vast majority of R’s in Congress.

There are limits even to Elon’s superpowers.

Here is the leaked memo from Thomas Pyle, Trump’s head of the Department of Energy Transition Team:

The parts that most affect us are

1) The priority to kill subsidies (that would include the $7500 tax incentive)

2) lower CAFE requirements (car makers would need to sell EV’s to meet these requirements)

3) Work to undo the Massachusetts vs. EPA ruling. This is not only the underpinning behind CAFE requirements, but was also used to force the EPA to approve California’s CARB ZEV program that the Bush administration initially rejected.

Massachusetts vs. EPA was a ruling based upon Statutory basis, not on constitutional basis. Simply amending the underlying statutes would instantly invalidate that ruling. There are many paths from there that Congress and POTUS could take to end CARB authority at many different levels.

Hardly a surprise. Trumps cabinet requirements are like putting Jack the Ripper in charge of the home for unwed mothers.

I think this will put GM and other legacy makers into a bit a quandary, as they must now adopt a wait and see attitude regarding how many evs to produce. No point in looking for Zev credits if they won’t be there.
So I envision a slow down in the already glacial pace of Bolt production.

Plus I wonder what they will do about the carry over provisions. That is the ability to carry over credits from year to year. They most certainly will put the kabosh on that.

To me all of this is just the investment companies trying top pump more action into what is currently becoming a more stabilized price range for Tesla stock and there is nothing the investment traders hate more than a stable market. No doubt reducing or eliminating the federal incentive will have some effect on US buyers but due to the restriction that this tax credit can only be used in the year of purchase and no carryover is allowed only a small portion of it $7500 amount is available the buyers of lower end EV’s and the upcoming Tesla 3; and, many of the high end buyers that want a Tesla S or X could really care less about the credit (while obviously they would be happy to have it). Also, while the federal incentive may go away that does not mean that all of the state and local incentives will follow. I used to freak out every time gas prices dropped because that reduced the incentive for people to buy EV’s until I realized that the result of more EV’s inevitably meant lower fuel prices so if EV’s couldn’t succeed on more merits than high fuel prices then they… Read more »

Come what may,I am getting my pre ordered Tesla Model 3.The EV incentives won’t stop me, in fact I don’t know if Canadian residence is entitled to the EV anyway. My only concern with Tesla is the life expectancy of the battery. None of the sale agents were able to tell me the cost to replace the battery if it becomes unchargeable.

I’ve been worried, but now we can relax. Forbes is known to always be wrong about everything.