IRS weighs in on tax rebate, mostly bad news for Model Y

[Rally]

If the government was honest and intelligent about wanting to increase the amount of EVs for the general population, then I agree with almost everything already said. The best to do this would of been an instant rebate at the time of sale. This would not only lower the price of the vehicle, it would lower the amount of sales tax paid if applicable, and result in a lower monthly cost since most people finance their vehicles.
Also, many people I know, myself included have changed their W-4 so they don't get hit with a tax bill the next year. Several people claim zero dependents even though they have kids. So a tax credit to reduce taxes owed is of no interest to these people because they break even or get a little back from taxes.

 

[SageBrush]

So a tax credit to reduce taxes owed is of no interest to these people because they break even or get a little back from taxes.

Wrong.
The EV tax credit reduces tax liability. It is not affected by tax pre-payments. Those who amend their W-4 to reduce pre-payments are simply taking the EV credit earlier than had they waited to submit their tax return.

As for POS, that just makes it that much easier for the dealerships to figure the tax credit into their car price. Be careful what you wish for.

 

[randmness]

You are comparing two different cars

From InsideEV, Oct 22, 2022:

The price was dropped in the last 24 hours.

Tesla (TSLA) slashes prices in China, raising demand concerns

Tesla has slashed Model 3 and Model Y prices by as much as the equivalent of $7,000 in China, raising...

electrek.co

Funny enough, prices dropped after the subsidy program ended in China.

Tesla, EV rivals absorb costs after China pulls plug on subsidy

China’s decision to end a more than decade-long subsidy for electric vehicle purchases has forced automakers, including Tesla , to deepen discounts to maintain sales as demand eases in the world's largest market.

www.reuters.com

 

[Snow Drift]

Given the significantly constrained availability of raw materials for batteries during a period of transition, is it more sustainable to put one long range Model Y on the road or five PHEVs?

This is not as easy a question to answer as you pretend it is.

As mentioned, in Europe they are ending PHEV subsidies as they found that owners did not charge the car and so pollution was a major issue.

I realize in the US the Act is created to help gas companies, so PHEV will continue to benefit from the credits.

 

[SageBrush]

Funny enough, prices dropped after the subsidy program ended in China.

Naturally. I am well aware that EV manufacturers set prices to collect the tax credit so long as the market accepts the price.
These prices are similar to US circa 2021 if my memory serves. The Model Y AWD LR I ordered in Oct/2021 was $54k before delivery/options/taxes, up from about $50k earlier in the year.

But you should be a bit more circumspect about presuming that prices in China can be prices in US, if only the tax credits and demand were the same. The cost of production in China is almost certainly quite a bit less than the US due to the supply chain, costs of labor, and fixed costs. One way to normalize international prices is to calculate car price divided by median HH income.

 

[randmness]

But you should be a bit more circumspect about presuming that prices in China can be prices in US, if only the tax credits and demand were the same. The cost of production in China is almost certainly quite a bit less than the US due to the supply chain, costs of labor, and fixed costs. One way to normalize international prices is to calculate car price divided by median HH income.

I agree that prices likely cant be the same price, just that the same car is 50% more expensive here. Tesla is seeing stiff competition in China (largely in result to the economy), and as a result, is forced to be more competitive on pricing. There is no US OEM making affordable EVs like BYD.

Mostly speaking out to the outrage from folks about the Model Y only qualifying for a rebate if its under $55K. It sounds insane considering it was just that price not too long ago.

 

[SageBrush]

The price was dropped in the last 24 hours.

Here is the Model Y LR from the Tesla website in China as of a few moments ago.
Notice the 0 - 60 time, and that the range is way less than 330 EPA miles.

Trying to compare like to like cars is tricky



Addendum: I don't think the website was updating correctly when I switched between models. Here is a table that looks right ...

 

[Rally]

Wrong.
The EV tax credit reduces tax liability. It is not affected by tax pre-payments. Those who amend their W-4 to reduce pre-payments are simply taking the EV credit earlier than had they waited to submit their tax return.

As for POS, that just makes it that much easier for the dealerships to figure the tax credit into their car price. Be careful what you wish for.

If I'm understanding your response, you are not understanding my post. I am talking about those who increase pre-payments to not incur a tax debt.
Of course if you claim 5 kids when you have no kids, the tax credit will help. But if you claim zero kids when you have one or two kids in order to not incur a tax debt, then the tax credit doesn't help that person.

 

[randmness]

Here is the Model Y LR from the Tesla website in China as of a few moments ago.
Notice the 0 - 60 time, and that the range is way less than 330 EPA miles.

Trying to compare like to like cars is tricky

It is especially tricky if you dont know how regional range estimates are calculated. Not sure if Im reading that correctly but 545km > 330 miles. In any case, range is calculated differently amongst all the regions.

But youre right, the extra speed is why the US model is 50% more. I believe China has the highest margins, but not sure how much it in comparison to the other regions.

 

[SageBrush]

Not sure if Im reading that correctly but 545km > 330 miles. In any case, range is calculated differently amongst all the regions.

1 Km = 0.62 miles
EPA is ~ 80% of CLTC
Using these conversion factors, 545 CLTC km is 270 EPA miles. IIRC, that matches up pretty well with the 4680 cheap(er) Model Y offered out of Austin.

The slower 0 - () times might be explained by the difference between 0-60 mph and 0-100 kph. It seems pretty close, so my original suspicion that Tesla is outfitting MIC Tesla models with slower motors now strikes me as unlikely. Did you see my addendum with a chart of the different model's specs ?

 

[Unclepaul]

Reason for the price decreases might be simply that Tesla has reduced their costs of production.

Tesla raised prices when their costs went up. Now that they are getting their battery costs down, plus integrating one piece castings, perhaps current cars are costing them less to produce, and they are passing those savings along to their customers.

Competition is coming and they want to maintain their leadership role.

 

[SageBrush]

If I'm understanding your response, you are not understanding my post. I am talking about those who increase pre-payments to not incur a tax debt.
Of course if you claim 5 kids when you have no kids, the tax credit will help. But if you claim zero kids when you have one or two kids in order to not incur a tax debt, then the tax credit doesn't help that person.

Incorrect.
One more time: tax credits affect tax liability, they do not change refund/tax_owed due to pre-payments.
Yours is a very common misunderstanding of the tax code.

 

[randmness]

The slower 0 - () times might be explained by the difference between 0-60 mph and 0-100 kph. It seems pretty close, so my original suspicion that Tesla is outfitting MIC Tesla models with slower motors now strikes me as unlikely. Did you see my addendum with a chart of the different model's specs ?

Tesla raised prices when their costs went up. Now that they are getting their battery costs down, plus integrating one piece castings, perhaps current cars are costing them less to produce, and they are passing those savings along to their customers.

I believe they work with CATL (and maybe BYD?) to supply some of the batteries (or cells), so maybe there is something different with the battery chemistry? I think Tesla's gross car margins are like 28%, but I havent seen anything that breaks it down by region (other than China-made Y's having slightly higher margins.) The price adjustments have been more dramatic than the increases, but Im curious to see how the economy continues to shape both of these vehicles.

 

[ucmndd]

If I'm understanding your response, you are not understanding my post. I am talking about those who increase pre-payments to not incur a tax debt.
Of course if you claim 5 kids when you have no kids, the tax credit will help. But if you claim zero kids when you have one or two kids in order to not incur a tax debt, then the tax credit doesn't help that person.

How do we live in a world where people buying $60,000+ EVs don't have the foggiest idea of how taxes work?

 

[AndrewZ]

I agree that prices likely cant be the same price, just that the same car is 50% more expensive here. Tesla is seeing stiff competition in China (largely in result to the economy), and as a result, is forced to be more competitive on pricing. There is no US OEM making affordable EVs like BYD.

Mostly speaking out to the outrage from folks about the Model Y only qualifying for a rebate if it’s under $55K. It sounds insane considering it was just that price not too long ago.

Even if the price were dropped to $55k, a Model Y LR would still be +$7k from the start of 2021. Add in the $7500 rebate and that would bring the actual price for consumers down to about the same level as the start of 2021 while still sending +$7k to Tesla relative to those early 2021 prices.

^^ This is what people should be arguing for, not an $80k cap. But I think prices will be coming down either way.

 

[ucmndd]

We should be phasing out PHEVs, not spiking their production and consumption. If the majority of the EV tax credit money goes towards PHEVs, it will be a colossal waste and possibly an ecological disaster if people feel they need to scrap/ditch their PHEVs in well under half the expected lifetime.

You know that when people sell cars they don't all go to the crusher ya? How long the first owner keeps something has nothing to do at all with how long it remains valuable in the market. Each of those cars becomes a used vehicle for people farther down the income scale.

As Tony Seba predicted and then explained the price of batteries continues to fall exponentially and the price of renewable electricity is also falling rapidly.

It's worth noting that the cost of battery materials has RISEN exponentially in the past several years due to skyrocketing demand (and admittedly other market forces). We have easily another decade of transition before large-scale lithium mining and recycling ramps up to meet current demand. So again, the question of whether or not it's prudent to spread limited resources over a larger percentage of the fleet is not as cut and dry as your principled stand makes it sound. As for the cost of electricity, my off-peak rate literally doubled this year.

 

[SageBrush]

As for the cost of electricity, my off-peak rate literally doubled this year.

Though not due to the spot cost of renewable electricity
Tony Seba is a very interesting lesson in how it is possible to be right, and very wrong at the same time

 

[Rally]

How do we live in a world where people buying $60,000+ EVs don't have the foggiest idea of how taxes work?

I would like to know the relationship you are insinuating. What is the connection between the price paid for a vehicle and understanding a complicated tax code? Only accountants buy EVs, or someone who isn't smart enough to understand the tax code doesn't make enough money to buy a $60k vehicle?
Have you shopped for a heavy duty truck, those are $70k+ vehicles. Must have a MD to drive buy a truck huh? Grow up.

 

[SageBrush]

What is the connection between the price paid for a vehicle and understanding a complicated tax code?

Off the top of my head I can think of three possibilities:

1. You do your own taxes, and should re-consider
2. You don't understand your CPA
3. You should find a competent CPA

 

[electricar]

How do we live in a world where people buying $60,000+ EVs don't have the foggiest idea of how taxes work?

They have tax accountants who they pay to make their returns look believable. They also have electricians because they have no idea how electricity works etc etc.