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How would losing the $7500 US tax credit affect Tesla and Model S?

Discussion in 'Model S' started by ddruz, Oct 13, 2012.

  1. ddruz

    ddruz Member

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    #1 ddruz, Oct 13, 2012
    Last edited: Oct 13, 2012
    If Romney gets elected it is very possible he will move to kill the $7500 EV tax credit and perhaps quite quickly. This raises several questions:

    How soon could it be rescinded, i.e. when is the earliest in 2013 cars put into service would no longer qualify? If the law is passed mid-year could it be made retroactive to Jan 1? (Any tax law scholars out there?)

    How would elimination of the tax credit affect future buyers of Model S? What about those who have now configured but will not receive their car till 2013? Personally I have already been thinking about what options I might drop.

    How would this affect pricing of GenIII? A $7500 credit has likely been assumed for the base price to be around $30,000. Full price of $37,500 is 25% more expensive and not nearly as affordable for the main stream buyer. Would GenIII still be a main stream car?

    How would elimination of the $7500 tax credit affect Tesla's viability as a company? Killing the tax credit effectively raises the prices overnight of all Model S cars sold in the US from between roughly 8 and 13%. That is a meaningful amount for many buyers. Perhaps the number of orders for fully optioned 85 kwh cars would not be greatly affected but the tax credit is a significant percentage of the cost of 40 kwh and 60 kwh cars and it seems fewer of those would be sold. Would Tesla lower their prices and take less than 25% profit on their cars? Would they concentrate more of their marketing on non-US markets more favorable to EVs?

    This has all been quite concerning to me as Romney has risen in the polls. I cannot see how his election would be beneficial for the EV movement or Tesla specifically, both things dear to my heart. I'm very curious what others think the effects of losing the $7500 US credit would be. Please do not turn this to turn into a political thread. Just objectively, what do you think the repercussions of losing the tax credit would be?
     
  2. steve841

    steve841 Active Member

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    Exactly why I moved to a Signature series ....

    Nonetheless, I still support Romney over the current option.
     
  3. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Economics gives a simple answer: removing the federal tax credit will effectively raise the price of the Model S and therefore reduce the quantity demanded. The real question is, by how much? Currently, Tesla is supply-constrained, not demand-constrained, so a reduction in the quantity demanded doesn't affect it. In the long-run, of course, the supply constraints will likely be solved.

    A related question: would Tesla adjust the pricing of the Model S in such an event?
     
  4. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    #4 jerry33, Oct 13, 2012
    Last edited: Oct 13, 2012
    Well, that's an 8.6% increase (assuming my configuration is $87,600 before credit), which is about the same as sales tax. This isn't a deal-breaker in my opinion.
     
  5. Lloyd

    Lloyd Active Member

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    If the tax credit is withdrawn, it will also increase the value of the model S cars previously delivered!
     
  6. kevincwelch

    kevincwelch Active Member

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    Really not interested in a political debate since both sides have important components of their parties.

    However, if Romney is elected and the credit is rescinded (and I think this would be a mistake), then this will dissuade middle class families from buying EVs. This is just my opinion. People who pay $80,000 for a car probably aren't going to be dissuaded by the lack of a federal tax credit. One might get fewer options or select a smaller battery if price were a concern. I'm planning for my purchase with the assumption that I will not get the federal credit or the Illinois rebate, and the liability I have after trade-in and cash down is very manageable for me if I don't get the credits. So, getting the credits is icing on the cake. However, for the middle class American who is considering a Volt, PiP or Focus (something like that) may no longer be interested in paying 50% more for a car that has certain limitations in terms of charging and range without getting the credit(s).
     
  7. jhs_7645

    jhs_7645 VIN: #3305

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    I've heard this from several people on the forum during the election, but I've never seen it sourced. Is there a source for this comment (other than general typical campaign rhetoric)? I'm really curious myself, but there are so many issues facing a president, unless it was specifically stated by the Romney camp, I just don't think it's good for everybody's peace of mind to continue spreading this.

    As a matter of fact, the little research I did found that Romney supported EV tax credits in MA:
    "He pursued policies to make greater use of carpooling and public transit, and sought tax credits to stimulate purchases of hybrid and other more fuel-efficient vehicles" (from http://en.wikipedia.org/wiki/Political_positions_of_Mitt_Romney)

    I'm leaning towards putting this in the FUD category.
     
  8. setritt

    setritt p6652

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    One of the big reasons I was getting the car was the credit. Georgia also has a $5000 tax credit - total $12,500. That's 1/8 of the performance model and a big deal in my opinion.

    I'm not sure he would move to get rid of the credit though - GA enacted it with both a republican governor and republican congress.
     
  9. ddruz

    ddruz Member

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    Would it be possible not to stray into the politics surrounding the issue but to rather stay on the question of what the ramifications would be if the tax credit were rescinded? I'm keenly interested in forum members' opinions on what would happen if, not the politics of whether. That could be the topic of another thread if anyone is interested in starting one. Thx.
     
  10. Arnold Panz

    Arnold Panz Model Sig 304, VIN 542

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    If the credit were to be rescinded, it would probably be as part of a larger "grand bargain" to reduce the deficit through tax increases, budget cuts and the elimination of tax breaks. The amount the EV credit costs the government is so small that it may avoid the scalpel. My biggest concern isn't necessarily Romney, who by all accounts as Governor understood the benefit of supporting alternative energy, but a Congress beholden to the Oil industry, who want to kill the EV credit purely for competitive reasons. Frankly, this is probably less dependent on who wins the Presidency versus who controls Congress.
     
  11. kevincwelch

    kevincwelch Active Member

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    Indeed.

    Including a push for more exploration and extraction of natural gas.
     
  12. Trnsl8r

    Trnsl8r Blue 85kwh since 12/8/12

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    Bingo. Something a lot of people forget (including the presidential candidates) is that the president doesn't get to decide tax law. Congress does that. Not saying the the president can't influence it, but I doubt that it would be even theoretically possible for the next president and congress to immediately remove the tax credit, certainly not by tax year 2013.

    The impact on Model S would probably not be great, but for the EV movement overall it could be devastating. Think of the folks struggling to get a Leaf just to "do the right thing". In that market the tax credit is key. Take that away, kill low-price EVs like the Leaf, kill wide adoption, kill the emerging charging infrastructure before it even got a chance to rise.

    Long-term, once the adoption is here and economies of scale had a chance to work, then the tax credit should go away, but we're probably 6-7 years away from that still.
     
  13. iridium

    iridium Member

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    I'm not sure someone could get away with removing it immediately. It would anger too many people and wouldn't pass, but it wouldn't surprise me if we saw a more aggressive phase out.
     
  14. contaygious

    contaygious Active Member

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    Well he said tesla was a loser company so I doubt he'd support an ev credit. Sounds like all the other gov spending he wants to cut, but honestly it wouldn't affect s sales at all, buy it would affect gen 3 sales. Anyone buying an s is not doing so based on 7,500 rebate. Maybe they would skip a few options at most. They say this is a sub 50k car, buy then how'd I end up at 106k? Even tax and delivery etc charges will put it around 60k and in that class of car the rebate isn't a deal maker or breaker.
     
  15. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Someone asked about Romney's views on EVs. The Orange County Register published an op-ed by Romney that, while not discussing the EV credit directly, makes it pretty clear that he disdains EVs.
     
  16. artsci

    artsci Sponsor

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    You're kidding, aren't you? This is all about politics.
     
  17. kevincwelch

    kevincwelch Active Member

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    I think everyone knows it is a political thing. However, I suspect the topic serves to generate discussion about how the EV market would be affected by such a move.
     
  18. SCW-Greg

    SCW-Greg Active Member

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    #18 SCW-Greg, Oct 13, 2012
    Last edited: Oct 13, 2012
    Don't think for a moment all those in for the EV cause will just be sitting around on their laurels. No doubt they/we will all be lobbying our congress to maintain, improve, or find other reasonable ways to encourage the viability of these companies, these jobs, these industries.

    I believe the difference about Romney on this issue is about removing barriers to a company's ability to thrive and flourish on it's own... so that it's costs are naturally as low as possible, to be efficient as possible. Rather than spending tax payer dollars to artificially stimulate demand.

    That being said, *if* the 7500 tax credit is removed in 2013 (which I don't think it would/could happen until 2014), would definitely cause me to rethink my configuration, and or purchase for a year or two.

    Would I love to see it jump to $10k rebate? Selfishly, heck yeah.
     
  19. Trnsl8r

    Trnsl8r Blue 85kwh since 12/8/12

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    Agreed, although they may be only slightly less funded than the oil lobby...
     
  20. Velo1

    Velo1 Member

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    As it stands now the Fed Tax Credit expires for a manufacturer when they reach 200,000 sold cars, which is a long time out for the Model S. But if Romney eliminates the credit he'd be accused of essentially raising taxes on the 53%, which I doubt he wants to labeled as doing. IMO, the credit is safe for 2013.
     

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