Expiration of $7,500 federal tax credit w/Model 3

[FrozenCanuck]

I agree this law should change. It's the right thing to do. At the time it was passed, I'm betting the lawmakers figured all auto makers would be at approximately the same competitive position. Obviously that has not happened. So if Tesla gets to 200k vehicles first (which they obviously will), they'll be at a competitive disadvantage in the US market for a number of years.

Imagine if Nissan or someone else could afford to spend another $7.5k building a car, knowing that the end price would be the same to the consumer? Not a fair fight.

Tesla should be rewarded for its leadership, not punished for it.

 

[Yggdrasill]

I agree the law should be changed.

The law should have awarded the $7500 dollars to the first million EVs, or something similar, and not tied it to the auto makers. That's how it is with the green HOV stickers, for instance. That's also how it is here in Norway. It's first come, first served, until all the incentives are gone.

 

[omarsultan]

Well, you could argue that Tesla has been rewarded with a dominant market position if they are that far ahead.

I think they are doing the right thing by not counting on the credit for the Model 3--it needs to be price competitive in its own right since they cannot count on Congress to continue the credit in its current form.

O

 

[ItsNotAboutTheMoney]

I would totally support the notion of a having the tax credit phased out for all car makers as soon as 2 or 3 companies have sold more than 200k - this way there is more of an incentive to "race" to getting the maximum of the tax credit.

I think that that would be a really bad idea. The key problem with the current rules is that the subsidy is relatively large and steps down very rapidly. $7.5k is 1/4 of the current selling price. If you're early to market, the steep subsidy loss means you can have your market pulled from under you by a bunch of laggards behind you.

All they needed to do with have an earlier, more gradual taper and better defined rules.

Say you have a huge tract of empty land and you have a car with significant demand. You manufacture LOTS of cars, and put as many as possible in any space you can find. Then, having reached 199,999 sales the next quarter you dedicate the next quarter's manufacturing, plus all your stored vehicles to US deliveries. The result is _far_ more than 200,000 vehicles at full tax credit.

I think early Model 3 buyers should be able to get the tax credit. The unfortunate irony is that unless Tesla does some serious messing about to manipulate the rules, Tesla would naturally ramp with higher-spec cars and the tax credit will drop before the buyers who benefit most can get their car. It just depends how they want to play the rules.

 

[GlennAlanBerry]

I hate to inject politics into this thread, but if the Republicans manage to keep control of the House in 2014 and 2016, then I think there is zero chance of any Federal EV credits being extended or improved.

 

[PhilBa]

Well, you could argue that Tesla has been rewarded with a dominant market position if they are that far ahead.

I think they are doing the right thing by not counting on the credit for the Model 3--it needs to be price competitive in its own right since they cannot count on Congress to continue the credit in its current form.

O

I agree with your position. EVs should be cost effective without the government stepping in. But there's another point that makes it less of an issue. The $7500 is a tax credit. As such those with FIT less than 7500 after deductions and credits only get a partial benefit. But worse, the excess doesn't rollover to the next year. A goodly percentage of people who can afford a $35K car will not have 7500 in federal taxes.

 

[RobStark]

I hate to inject politics into this thread, but if the Republicans manage to keep control of the House in 2014 and 2016, then I think there is zero chance of any Federal EV credits being extended or improved.

Georgia is as Republican as they come. Gov is R and both houses of the legislature are over 2/3 Republican yet Georgia has on of highest State subsidies in the US for BEVs. $5000. Atlanta is the top Nissan LEAF market in America or very close to it every month. The subsidy is in danger of going down next year but still there.

Lobbyist just need to changer their tune. From Climate Change, Ocean Acidity and Carbon Foot Print to Energy Independence, National Security, and sticking it to Russian and Middle East Tyrants. You don't want CEO of Tesla talking about sticking it to any potential customers but Elon talking more about Energy Independence would not hurt.

IMO, even with Rep control of both Chambers a coalition of Ds and Rs can get this done with good lobbying.

 

[GlennAlanBerry]

Spinning the EV tax credits towards national security, energy independence, etc. might be effective with some business-friendly Republicans, but not so much with the Tea Party types that seem to be running the show more and more. Their hatred of the Federal government and President Obama is likely to trump any rational arguments about Federal Tax Credits.

Hopefully, I am wrong about that...

 

[jandkw]

+1 RobStark. There are plenty of forward looking republicans who love EVs, fuel/cost savings, clean air, less dependency of foreign oil, and favor high tech. Governor Rick Perry is one of them. Many republicans in my state of NC love EV as well and they understand this is the future of cars.

 

[RobStark]

Spinning the EV tax credits towards national security, energy independence, etc. might be effective with some business-friendly Republicans, but not so much with the Tea Party types that seem to be running the show more and more. Their hatred of the Federal government and President Obama is likely to trump any rational arguments about Federal Tax Credits.

Hopefully, I am wrong about that...

As you can see in the Republican primaries, almost all Tea Party challengers lost to Mainstream Republicans.

TPs are not 51% plus of Republican Senators and Congressmen much less the Senate and Congress as a whole.

And no reasonable analysis shows they have a chance to become the majority in the near future.

Feelings about Obama among TP are largely irrelevant to ZEV policy.

 

[jhm]

Eventually, Tesla will use up all its tax credits while the laggards squander $7500 selling compliance cars. I think this may become a stigma for the laggard brands. They will look pretty pathetic trying to sell a car nobody wants while Tesla proves to be worth forgoing the tax incentive. Who wants to buy government cheese? Fiscal conservatives will be able to point to Tesla a proof that these incentives are not really needed. Politcally, Tesla will be the winner, just as soon as they get off the government cheese. It will be a badge of honor to blow through these credits.

 

[GlennAlanBerry]

Oh come on, Rob. The TP (and fear of the TP) has been dragging the Republicans to the right for quite some time. They are not the majority among Republicans, and hopefully never will be, but the Republican leadership in the House and Senate is still afraid of them. The fall of Eric Cantor has only made this worse. That is what I mean by "running the show".

The TP types see ZEV credits as a waste of "their" tax money that was foisted upon them by the evil Federal government and Obama. Just read the comments after any article about Tesla or EVs in general, and you will see plenty of examples of this thinking. Being green is a waste of money, climate change is a hoax, they don't want to subsidize a rich person's toy with tax credits, etc. There is a lot of politically motivated anti-EV sentiment out there from a small, vocal minority.

My main point is that the TP currently has enough votes in the House to prevent any new ZEV credits coming out of Congress. If TP candidates continue to lose elections, maybe the fear of them will go away.

 

[Zaxxon]

Back to the OP's topic at hand, a couple of things:

1) Only US cars count. Tesla may be well over 200k total cars before the III debuts, but unless it's significantly delayed (insert joke here about how we all know it will be), the US total may be less than 200k. At the least, it's a possibility.
2) The credit doesn't change at all immediately after hitting 200k--not until the 2nd calendar quarter after 200k is hit.

So, if we take Cattledog's reasonable estimates for US-only sales, and assume the G3 debuts at the end of 2017 (tee hee hee) and pushes Tesla over 200k US vehicles by the end of the year, the credit would actually have its first drop on 4/1/2018, to $3,750. It would remain there until 10/1/2018 regardless of how many cars Tesla sells in that period, and would then drop to $1,875 until 4/1/2019 at which point it'd phase out.

On a $35,000 vehicle, a $3,750 credit is still very significant (interestingly, it's likely to be about the same percentage of the vehicle's ASP as the $7,500 credit is for the S), and we will likely see at least six months of G3 sales where that's available, plus another six months at $1,875.

 

[Cattledog]

It will be a badge of honor to blow through these credits.

Yup. +1

 

[CHGolferJim]

Only US cars count.

US sales or US production?

 

[Zaxxon]

Sales.

 

[Zaxxon]

Furthermore, sales before 1/1/2010 also do not count.

 

[yobigd20]

We know Its per manufacturer but do we know if it's "sales" or 200,000 claims for the credit? Some buyers may not be eligible for the credit (or don't even bother to file for it) therefore I am wondering if those get counted towards the 200k number...?

 

[Zaxxon]

It is sales. As stated in the actual text, which DaveT kindly included in a post earlier in this thread.

 

[austinEV]

..... but unless it's significantly delayed (insert joke here about how we all know it will be), .....

This is a bit off topic, but I am starting to think the gen III will be exactly on time. Think about it. Roadsters were all over the map because they were hand built by a small group of overworked people. Model S was late because it was make or break for the company. While I love my S I KNOW there were corners cut. There was more thought that could have been put into the interior comfort; that is sufficient to make my point. The model X was delayed.... so they could get it right and it was no longer make or break. Actually, the longer they wait on the Model X the better it is for the company since there is no economic payback for making 2 models when they cannot make enough of the first one to meet demand.

So, what about Model III? more of the same. They will finish up the X for the most part in late 2014. Now these teams have NOTHING to do for a couple years while they wait for the gigafactory to come online. The design is no longer the constraint, the supply is. I 100% gurantee there is serious design work on model IIi right now. They will be done and polishing for a year. They will have moved on to the Gen III crossover before the Gen III sedan is officially released to production. So the way I see it, the design will be on the shelf. The car tooling will be all done. So they can relatively easily be on time by making a few thousand model III right on schedule, even if the GF is a bit delayed. the GF is the constraint.