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Best Way to Honor the Intent of the Tax Credit?

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*The average price of a midsize car is $25,000
*The average price of a hybrid/alternate energy car is $26,000

But the average price of a new car in 2015 is $33,500. The $35,000 price of the Tesla 3 was not an accident. The Tesla was priced around the average car even though the Tesla is no average car.


You don't seem to understand the difference between revenue and profit.

That makes no sense in the context of a discussion about the $7,500 tax credit for EV's. We provide the tax credit because it provides an incentive that the free market does not provide for things that are good and necessary, the conversion of cars to EV to stop global warming, to build US economy for 21st century, to eliminate the $300B oil trade deficit tax on US economy, to end the national security threat of oil dependence, oil debt, military debt, oil terrorism.

The tax credit should be increased and extended until US has converted to EV cars and hydrogen powered trucks and planes.
 
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But the average price of a new car in 2015 is $33,500. The $35,000 price of the Tesla 3 was not an accident. The Tesla was priced around the average car even though the Tesla is no average car.




That makes no sense in the context of a discussion about the $7,500 tax credit for EV's. We provide the tax credit because it provides an incentive that the free market does not provide for things that are good and necessary, the conversion of cars to EV to stop global warming, to build US economy for 21st century, to eliminate the $300B oil trade deficit tax on US economy, to end the national security threat of oil dependence, oil debt, military debt, oil terrorism.

The tax credit should be increased and extended until US has converted to EV cars and hydrogen powered trucks and planes.
Point of order. Hydrogen is not a clean form of energy storage. 95% is made from natural gas, which yes, produces carbon. Plus the electricity which is used to do that conversion, which isn't necessarily clean. Then there's the lack of infrastructure which will need to be built to refuel planes, and trucks. Etc.
 
Point of order. Hydrogen is not a clean form of energy storage. 95% is made from natural gas, which yes, produces carbon. Plus the electricity which is used to do that conversion, which isn't necessarily clean. Then there's the lack of infrastructure which will need to be built to refuel planes, and trucks. Etc.

Also the tanks are a packaging nightmare that limit the options on vehicle design.
 
The tax credit should be increased and extended until US has converted to EV cars and hydrogen powered trucks and planes.

When the incentives end should you shutter the factory?

The best way to have an economic and socially productive factory after the incentives end is to get as far down the experience curve as possible before the incentive ends.

1) "Sell 750,000, or more, cars with the full incentive in place. A million if you can."

2) "Use global demand to avoid crossing the 250K trigger until the factory can run full speed ( I wonder how leases are treated? Could you lease the early production to keep it local and still avoid triggering until the factory was up to speed?)"

3) "Use a car design you have. That would be the Model 3, and it is a good one."

So the best way to honor the intent of the tax credit is to sell as many cars as possible with the credit still in place. If Tesla can build and deliver half a million after the trigger, it is a good thing for everyone:

A) 500,000 more Tesla customers feel like they got a ~$10,000 raise. That is good for the economy.
B) 500,000 more Tesla customers collectively benefit from $3.7 billion in additional public support. This helps Tesla, too.
C) I get a Model 3 for $26,000 and change.

A part of this is to make Elon seem more rational in his delivery expectations by painting him as in the center, but I really do think the world is better off, and Tesla employees are better off if the factory is designed for 750,000 and starts off at full speed. And does not get shuttered when the incentives end.

See above. And it is not gaming the intent of the incentives.
 
When the incentives end should you shutter the factory?

The best way to have an economic and socially productive factory after the incentives end is to get as far down the experience curve as possible before the incentive ends.

1) "Sell 750,000, or more, cars with the full incentive in place. A million if you can."

2) "Use global demand to avoid crossing the 250K trigger until the factory can run full speed ( I wonder how leases are treated? Could you lease the early production to keep it local and still avoid triggering until the factory was up to speed?)"

3) "Use a car design you have. That would be the Model 3, and it is a good one."

So the best way to honor the intent of the tax credit is to sell as many cars as possible with the credit still in place. If Tesla can build and deliver half a million after the trigger, it is a good thing for everyone:

A) 500,000 more Tesla customers feel like they got a ~$10,000 raise. That is good for the economy.
B) 500,000 more Tesla customers collectively benefit from $3.7 billion in additional public support. This helps Tesla, too.
C) I get a Model 3 for $26,000 and change.

A part of this is to make Elon seem more rational in his delivery expectations by painting him as in the center, but I really do think the world is better off, and Tesla employees are better off if the factory is designed for 750,000 and starts off at full speed. And does not get shuttered when the incentives end.

See above. And it is not gaming the intent of the incentives.

First after 2009 the 250k trigger was changed to a 200k trigger,

Second, I take great offense to the comment of "$3.7 billion in additional public support" that's complete BS. You seem to misunderstand what a tax credit is. It isn't support from anyone but myself. I'd simply pay less in taxes and if I didn't make enough then I'd pay nothing in taxes. Not a single other taxpayer's money goes towards me or Tesla. This is only a refund if I've paid it in already. When you say "public support" you sound like the tools in the news who keep claiming taxpayers are supporting Tesla.

~$35,000 is the price of the average new car according to KBB. $36k is the average price of a new EV. The Tesla Model 3 is $35k regardless of a tax credit. A tax credit which you wouldn't even see until the following year and only if you paid it in already as income taxes.

I don't think it's wise for anyone to be relying on a tax credit to purchase the car, if that's what makes or breaks the purchase then you're buying more than you can afford.

The intent of the incentives is for EV adoption by consumers. It doesn't really have anything to do with manufacturers. It was part of the Energy Improvement and Extension Act of 2008. Tesla can produce a billion cars and it wouldn't matter, because if consumers don't purchase them in time then the consumers get no credit. To honor the intent on the tax credit you must buy an EV.

Tesla's current plans are going to be just fine for US consumers looking to immediately purchase an EV. If production is ramped up quickly then they can meet full US demand in time. No reason to produce more than they can sell.

If you really want to help, then lobby anyone you can to extend the tax credits...
 
Sometimes incentives are abused, or gamed, which does not seem right. Is manufacturing and delivering as many cars as possible inside the credit window abusive?

The $7500 EV tax credit is there to create low cost production capacity of EVs, with the goal of competitive pricing after the incentive goes away. The behavior most consistent with that goal is to build a factory that can satisfy the entire demand inside the full rebate window. This maximizes production capability and efficiency, and is the best path to a "when we are all done" price that is as low as the credit incentivized price, say $26,000 dollars.

The goal of the program is a Model 3 that is profitably sold for $26,000 without incentives. Tesla is not supposed to just close up shop when the incentives expire. Manufacturing efficiencies are supposed to have improved to where $26,000 is the market price - cars move at that price without government help.

Tesla should be planning price reductions to match the incentive phase out schedule.

With that in mind, it is in Tesla's and the public's best interest to deliver as many cars as possible in the 2 quarter window of the $35,000 price point. They make $9K more per car than they do after they honor the price reductions implicit in the bill.

This says they produce 400,000 cars in 6 months. Then lower the price. It sounds like Henry Ford.

Does this sound right to you?

I think you are missing one major point. Tesla does not price it's cars based on the consumer tax incentive, they price their cars based on their gross margin targets. See this article here. One paragraph sums it up well:

"It's also worth noting that Tesla does not attempt to capture any of these incentives in the form of price increases. The company prices its products based on its gross margin target of 20% to 25%, which then helps cover operating expenses. Tesla vehicle prices are standardized worldwide (subject to foreign currency fluctuations), and the company does not increase the price in regions where incentives are present."
With that in mind, Tesla will definitely not lower the cost after the incentives expire, nor should they.
 
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...Tesla will definitely not lower the cost after the incentives expire, nor should they.

Are you asserting that Telsa's costs will not be lower by the time the incentives expire?

If their costs will be lower, then the math (and the shared company assertions) say the price will also be lower.
 
Are you asserting that Telsa's costs will not be lower by the time the incentives expire?

If their costs will be lower, then the math (and the shared company assertions) say the price will also be lower.
I can certainly assert that Tesla's costs will not be lower after the incentives expire, especially since the incentives have zero bearing on Tesla's costs nor the price they charge the customer.
 
I can certainly assert that Tesla's costs will not be lower after the incentives expire, especially since the incentives have zero bearing on Tesla's costs nor the price they charge the customer.
There's probably an indirect relationship between incentives and Tesla selling cars. There's also an argument that their highest cost component, batteries, will become cheaper as the GF ramps up. Elon has stated as much recently. Using that argument will probably help Tesla with profits but not reduce the cost of the car.
 
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Are you asserting that Telsa's costs will not be lower by the time the incentives expire?

If their costs will be lower, then the math (and the shared company assertions) say the price will also be lower.
I didn't say anything about if there costs would be lower. The original post declared that Tesla should lower the price of the car when the incentives expire as if the two were related--yet all the evidence shows that the tax incentives are not related to how Tesla prices their cars.

Whether Tesla will lower their prices at some later date remains to be seen. It is certainly possible that the base Model 3 price could come down as their costs drop and their margins increase, or they'll just keep adding features as they've done with the Model S. Either way, it's not related to the tax incentives which was the point of my post.
 
But the average price of a new car in 2015 is $33,500. The $35,000 price of the Tesla 3 was not an accident. The Tesla was priced around the average car even though the Tesla is no average car.

No, that is the average price for all VEHICLES (trucks, SUVs, etc). The average price for midsize cars and EVs like the Model 3 is the $25,000-26,000, like I said.



That makes no sense in the context of a discussion about the $7,500 tax credit for EV's. We provide the tax credit because it provides an incentive that the free market does not provide for things that are good and necessary, the conversion of cars to EV to stop global warming, to build US economy for 21st century, to eliminate the $300B oil trade deficit tax on US economy, to end the national security threat of oil dependence, oil debt, military debt, oil terrorism.

The tax credit should be increased and extended until US has converted to EV cars and hydrogen powered trucks and planes.

Yes, it does. The poster I made that comment to (not you) said their "math" shows Tesla making a larger profit at $26,000 than the current stated price of $35,000. Tesla may sell a larger volume at that price point (ie, higher revenue), but it will not see higher profit if each of those additional sales is sold at a loss compared to the $35,000 option.

As to extending the credit, I'd be ok with extending it to something like 500,000 vehicles per manufacturer. But if you want to expand it anymore than that, you have to do what Germany recently did and ask the manufacturer's to pay for half of the credit while the US pays the other half. But I don't see that flying in the US. And I don't think the tax credit needs to be in place until the market place converts to electric. It simply has to catalyze enough of a movement towards electric to get the market seriously headed down that path.
 
Are you sure?

Yes, we realize that income needs to exceed expenses...

I'm still waiting to hear your opinion on how to sell something that costs you $31k to make, for $26k.

Most of us realize the answer is: "Sell something different that doesn't cost you $31k", but your opinion so far is to sell the $31k thing for $26k.

I'm anxious to hear about that math.
 
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