Model S/X Owners Have Priority Model 3 Orders Over Non-Owners

[dhanson865]

The problem here is that the federal EV Tax Credit doesn't care how many Tesla drivers file for/qualify for the credit, it goes by vehicles sold. So, for example, Tesla #200,000 leaves the factory at the end of 2017, it's not going to matter to future buyers that only (200,000-x) qualified for the tax credit.

Maybe but the federal tax credit doesn't cut off at 200,000 cars. If Tesla makes a billion cars in 2018 then there will be tax credits on billion cars. If you want more realistic numbers see below.

The phase-out period stretches over one year, beginning in the second calendar quarter after the quarter in which the manufacturer hits the 200,000 vehicle US sales mark. From there, all qualifying vehicles sold by the manufacturer are eligible for 50% of their specified credit for the first two quarters and 25% of the credit for the next two quarters.

For example if a manufacturer sells its 200,000th vehicle in the first quarter (Q1) of 2018, the credit amounts for all of that manufacturer's eligible vehicles would phase out as shown in the table below.

Tax Credit Phase-Out Schedule Quarter Credit
Q1 2018 Full amount
Q2 2018 Full amount
Q3 2018 50% of full amount
Q4 2018 50% of full amount
Q1 2019 25% of full amount
Q2 2019 25% of full amount
Q3 2019 No credit

It's entirely possible that it will trigger sooner and run out sooner but the important concept is that it doesn't go away immediately and when it starts going away it diminishes slowly not all at once.

If Tesla is pumping out 10,000 plus a month in 2018 they could easily sell 50,000 or more with the full tax credit. They could then be selling double that amount in the next 6 months with half tax credit. And then double rate again with 1/4 tax credit. All in all hundreds of thousands of Model 3s could be sold with federal tax credit.

Keep in mind Tesla can game this slightly by focusing on overseas deliveries of Model S and Model X the month they are going to roll over 200,000 US deliveries. If that rolls them into the next quarter it extends the tax credit by 3 months no matter how many they sell after that.


Now to update the current totals at end of 2015 + partial 2016 would be

US running total Tesla Sales vs 200,000 for federal credit phase out trigger
2011 end 1,900
2012 end 4,550 (2,650 for 2012 + prior year)
2013 end 22,200 (14,650 for 2013 + prior years)
2014 end 39,500 (17,300 for 2014 + prior years)
2015 end 65,414 (25,914 for 2015 + prior years, Model S and Model X)
2016 Feb 68,584 (3,170 for Jan/Feb 2016 + prior years)

Do the math if Tesla is doing less than 26,000 a year US in 2015 how many years will it take to hit 200,000 US sales? They'll ramp up S and X production but there will still be plenty of discounts on Model 3.

Lets say 50,000 US for 2016 and 75,000 US for 2017, 25,000 in the first quarter of 2018 finally triggering the phaseout.

Tax Credit Phase-Out Schedule Quarter Credit

Q4 2017 possible deferred shipping to EU/ROW to avoid crossing 200,000 in US
Q1 2018 (200,000 mark crossed, some trickling of Model 3 in this quarter, maybe 500 a week for 7,500 with full credit?)
Q2 2018 Model 3 with Full credit (no signature series per Elon, maybe 1,000 to 2,000 a week for 25,000 with full credit?)
Q3 2018 50% of full amount (will they be making 3,000+ a week by then? Maybe 12 weeks worth is 40,000 Model 3s with half credit?
Q4 2018 50% of full amount (maybe 60,000 model 3s with half credit in this quarter?)
Q1 2019 25% of full amount (maybe 75,000 Model 3s with quarter credit)
Q2 2019 25% of full amount (maybe 100,000 Model 3s with quarter credit, with extra production going outside the US)
Q3 2019 no credit

all in all they might get out 35,000 with full credit, 100,000 with half credit, and another 175,000 with quarter credit?

Shift the trigger earlier by one quarter and 25,000 less cars get a full credit, shift that trigger later by one quarter and 40,000 more get a full credit. Just depends when they can start cranking out Model 3 en masse and when the trigger is.


Tesla cumulative global sales
2012 2,600 cars
2013 25,000 cars total (22,400 cars in 2013 + prior year)
2014 57,000 cars total (32,000 cars in 2014 + prior years)
2015 107,000 cars total (50,000 cars in 2015 + prior years)

2016 forecast in the last earning call is 80,000 to 90,000 cars.

2017 could take it up to 125,000
2018 could take it up to 190,000

It might be less but their "track record" is that they increased production by 56% comparing 2015 to 2014.

since the new forum collapses large quotes, I'll post this TL;DR "all in all they might get out 35,000 with full credit, 100,000 with half credit, and another 175,000 with quarter credit?" in the US + whatever they send to Canada and Europe and Asia, and Australia.

 

[MiamiNole]

I wouldn't automatically assume that every Model S/X owner has enough money to check all the options to get an early Model 3. I've seen a bunch of S/X owners here that say they are buying the Model 3 for their significant other. Being Model S/X owners doesn't necessarily mean they have enough to buy a second S/X, or even a fully loaded Model 3. Plus there are those that stretched to get an S who will get reservation priority. Unless they plan on selling their S to get a fully loaded Model 3, I wouldn't lump them in that category at all. Just as similar, there will be a large spectrum of non-owners who are buying a Model 3. There are those that can easily afford to get a maxed out Model 3 to those who are relying on the tax credit just to be able to afford a base Model 3.

The only common thread amongst all these groups are that they all want to buy a Tesla, and as it stands right now, buying a Tesla affords you a $7500 tax credit if you qualify. Access to the tax credit has been my only focus regarding this issue. <I>Should</I> Tesla care which of its buyers are able to get the tax credit? Can't really say. But I personally would think that allowing everyone the equal opportunity to take advantage of getting the tax credit would be more important than determining who gets to reserve first. I was fine with highly option cars getting delivered first (and therefore being first to take advantage of the tax credit), but this decision throws a curveball to non-owners that is outside of their control...

 

[hoang51]

Deliveries will probably be prioritized in this order:

1. Region/geography
2. Options
3. Model S/X Owners
4. Reservation Date

I believe this is an accurate probability of how the Model 3 is delivered, judging by how Tesla has been shipping out new cars, to meet certain criteria and financial deadline.

 

[McHoffa]

since the new forum collapses large quotes, I'll post this TL;DR "all in all they might get out 35,000 with full credit, 100,000 with half credit, and another 175,000 with quarter credit?" in the US + whatever they send to Canada and Europe and Asia, and Australia.

That's assuming a very fast ramp up on production (which I doubt will happen. The phaseout really should be on numbers of cars, like 250k at full credit, 100k at half, 100k at 1/4 and then none. Because tesla has to ramp up production unlike other automakers, they maybe sell 400k cars under credit if they ramp really quickly, or they may sell 250k under credits if it's a slow rollout.

So here's another wrench in this idea of existing owners getting priority: What about investors? What about the little guy that can't afford a Model S/X but invested some cash into TSLA in hopes of at least being first in line and getting one of the first Model 3s? Now they get pushed back in line. I'm slightly obsessed with Tesla so I guess I'll suck it up and accept that I may not get my car as soon as I've been hoping for the past couple years AND may miss the tax credit, but the average Joe that more casually watches them, invested in them and waited patiently, but couldn't buy the Model S/X would have good reason to be mad about this decision.

 

[diamond.g]

If this pushes delivery out to 2019 for us non-owners I'll probably look to lease a Bolt as a hold over. Just not looking forward to the number of miles I am gonna have to pay for upfront on that.

 

[tga]

I was very grateful to receive this email. I don't tweet very often but a month ago I tweeted to Elon that those of us who supported Tesla early on should get some preferential treatment in ordering Model 3 for family members.

While I'm not thrilled with current owners "jumping the line" (I'm reserving in-store, and plan to check the "Max my Model 3" button, so I should be an early delivery), I'll live with it. Although I'm opposed to current owners getting to jump the line ordering for others, family members or not.

If you're buying the car in your name, OK. If you're ordering for your spouse, kids, parents, siblings, aunts/uncles, no. They can go to the back of the line with the rest of us hoi polloi.

The problem here is that the federal EV Tax Credit doesn't care how many Tesla drivers file for/qualify for the credit, it goes by vehicles sold. So, for example, Tesla #200,000 leaves the factory at the end of 2017, it's not going to matter to future buyers that only (200,000-x) qualified for the tax credit.

Minor point - it's 200,000 US sales, not 200,000 total sold/shipped. They could send the next 1,000,000 cars to China and it wouldn't impact the tax credit.

One thought I had - if I buy a Model S after placing my 3 reservation, does that suddenly bump up my priority? What about a used Roadster?

 

[MojaveWheeler]

This is a major buzz kill for me, because I can't afford an S/X (student loans are the death of my generation). It basically means that there's no way for non-owners to get the car with any sort of rebate, even if the car ships on time, and existing wealthy owners who already received a rebate will get one yet again.

Either way I agree with Teslas decision, they can do as they please. Personally I won't be making a reservation in the store now. Instead I'll take advantage of allowing Tesla to spend a few years refining the Model 3 and then reconsider ordering.

I wish Tesla all the success in the world.

 

[MojaveWheeler]

I should also say for non-owners this kills a lot of the fun of going to the store (like at an apple event) because you know there are tons of people in front of you with priority. The whole point of going to the store the day of is to among the first in line.

 

[Muaddid]

I should also say for non-owners this kills a lot of the fun of going to the store (like at an apple event) because you know there are tons of people in front of you with priority...

I'm in the same boat, I was already not sure since I wont be ordering a fully optionned out Model 3, now that up to 100k (maybe more by then) people can be ahead, I'll just wait for the online reseravtion for sure

 

[bonnie]

If this issue is important to Tesla Motors - although I am not sure it is - there is one way they can proceed that will level the platform, and that is to emulate what we do at our lodge. I'll spell it out in generic terms, however.

An item has a putative cost of $X. Most customers ("A") are exposed to a state sales tax, so if that's 10% they pay $1.1X
Some customers ("B") have tax-free status (for example, state employees). Unadjusted, they would, of course, pay $X.

There are two ways to proceed so that all pay the same amount. One can:
*Increase the price of the good to "B" customers to 1.1X, or
*Decrease the price of the good to "A" customers to 0.90909X

Should Tesla proceed in analogous fashion? That is, so that those who can and those who cannot take advantage of the tax credit be treated so that all have a final payment of the same amount? Could it do so?

In order so to proceed, Tesla would need to know the tax filing status of its customers up to the point they achieve the production cap. Remember, the $7,500 tax credit itself is not a fixed amount - there is a sliding scale from 0 to 7500. Some of the Model 3-buying public obviously won't meet the minimum criteria necessary for the credit to begin to kick in; others obviously will be able to take advantage of the entire amount.....and many others won't know until they file their tax returns where in the middle they are. In order equitably to proceed, Tesla probably would have to be prepared to send some kind of rebate after April 15 of the following year....


Yecch. But I thought I'd throw out and explore the idea.

For Tesla to try to take on normalizing prices with the tax credit embedded would be a nightmare. Basically they'd be making more money on one customer's car over another. Can you imagine the outrage over that?? "Why should I have to pay more than this other customer?" Would they then have to try to normalize prices across the EU, because some countries offer better incentives than the other? It just would be a logistical nightmare & I'd rather they focus on the business that they're in. Making cars.

I am curious, however, regarding one thing: For all the forum members fussing about the tax credit and worrying they won't receive it ... how many of you have contacted your legislator? They are the people who can actually do something about this.

 

[lids07]

First off let me say that I know that this is an extreme scenario that most people (as well as Tesla) would not sign up for.

However, given that most non owners biggest issue is the tax credit, it would be interesting if Tesla could add in an income factor when determining shipping order. For example if you entered in your marital status (Single / Married) as well as yearly household income, Tesla could then determine your maximum possible rebate assuming no other itemized deductions and also consider this when finalizing the shipping order. My reservation number could be lower than yours and we would have a similar vehicle configuration, but if Tesla is nearing the 200K clip level (or the subsequent quarter to trigger the phase out) and someone with a higher order number could not take advantage of more than 50% of the tax rebate (1st stage of phase out), then they could prioritize my car first and keep both parties happy. If there were multiple orders that they would like to swap to maximize the credits but not enough slots to do so they could then loop back to the prioritization of current owners over new owners.

Obviously there are many other factors that would come into play here but i'm just thinking out loud to see if there is a way that would keep everyone happy.

 

[Max*]

Tesla has it all wrong. They should prioritize based on how many posts the TMC member has. The most posts goes in front of the line, new members go in back of the line

 

[Bimbels]

Tesla is a car company. They aren't here for charity. Wow. They don't owe anyone any discount! And it's not their fault the government has the limit they do on EV credits! Like Bonnie said, and I have done: write your legislator if you want anything done about it. Or buy a different EV that will still get the credit. Or accept that there might not be a credit but you will be getting the best EV on the market.

If Tesla already had reached the 200K no one would be complaining. For all we know they will reach it before any real number of 3s roll out. This hand wringing is painful to read, honestly.

 

[eclipsis]

Tesla is a car company. They aren't here for charity. Wow. They don't owe anyone any discount! And it's not their fault the government has the limit they do on EV credits! Like Bonnie said, and I have done: write your legislator if you want anything done about it. Or buy a different EV that will still get the credit. Or accept that there might not be a credit but you will be getting the best EV on the market.

If Tesla already had reached the 200K no one would be complaining. For all we know they will reach it before any real number of 3s roll out. This hand wringing is painful to read, honestly.

Agreed. Without Model S/X owners, there would be no Model 3. Plain and simple, plus Tesla doesn't owe anyone a tax discount. That's on the federal government.

 

[dhanson865]

That's assuming a very fast ramp up on production

Since when is 1.5 years a quick ramp? I'm talking about production for all of 2018 and part of 2019. I don't consider that quick.

Tax Credit Phase-Out Schedule Quarter Credit

Q4 2017 possible deferred shipping to EU/ROW to avoid crossing 200,000 in US
Q1 2018 (200,000 mark crossed, some trickling of Model 3 in this quarter, maybe 500 a week for 7,500 with full credit?)
Q2 2018 Model 3 with Full credit (no signature series per Elon, maybe 1,000 to 2,000 a week for 25,000 with full credit?)
Q3 2018 50% of full amount (will they be making 3,000+ a week by then? Maybe 12 weeks worth is 40,000 Model 3s with half credit?
Q4 2018 50% of full amount (maybe 60,000 model 3s with half credit in this quarter?)
Q1 2019 25% of full amount (maybe 75,000 Model 3s with quarter credit)
Q2 2019 25% of full amount (maybe 100,000 Model 3s with quarter credit, with extra production going outside the US)
Q3 2019 no credit

You could argue that maybe less will be made per quarter but the factory has pushed out almost 500,000 cars a year under NUMMI management. Tesla shouldn't have a problem pushing out half that in 2019.

 

[lids07]

Agreed. Without Model S/X owners, there would be no Model 3. Plain and simple, plus Tesla doesn't owe anyone a tax discount. That's on the federal government.

I completely get both sides of this and understand why each side feels a certain way about Tesla's decision. Personally, I am a non owner and I don't have an issue with it for the reason that you and others are stating.

But just because people were told not to count on getting the tax credit doesn't mean that they don't have any right to be upset about potentially not receiving it. There is nothing wrong with holding out hope and for some it is now getting less and less likely that they will get the credit. For many of people eyeing this car $7500 is a considerable amount of money.

For me, all this means is that I will go to a Tesla store on the 31st and put my money down in order to put myself in the best position to get the credit. I understand that's not an option for everyone though.

 

[Fallenone]

First of all, Tesla didn't say how they are going to prioritize previous owners. It could be taking their reservation date back a week, a month, who knows.

Second, Tesla has said they will prioritize on delivering highly optioned Model 3 first. If people are on the boarder line of buying the Model 3 because of worrying about if able to get the tax credit, then they are more likely to order the base version and this basically push them further down the line in the first place, S/X owner or not.

Third, if the Model 3 got delayed by a year or so. There won't be any full tax credit for anyone. They've already sold about 50k so far, this year maybe another 40k, 2017 maybe 70k. And by the middle of 2018, phase out begins. While I definitely don't hope this turns out to be true in the future, but it is a possibility, especially if they can't sell enough S/X to have the money to invest for making the 3.

Tesla has always downplayed the tax credit when it comes to Model 3 (it was only picked up recently by some media, the company always stated $35k for base, compared to GM saying Bolt will be around $30k then putting an asterisk for the tax credit). I think this is their way of telling people, don't get your hopes high for the tax credit.

 

[K-MTG]

For instance, I just changed my Model X order to a 90D and will get in 2 weeks. If I reserved as soon as reservations for the Model X opened and ordered the 70D I would still have to wait until late fall to take delivery. All a reservation does it allows you access to the design studio earlier but it doesn't necessarily mean you will get your car first unless you choose loaded options.

I predict the Model 3 roll out will be similar

 

[shrink]

Agreed. Without Model S/X owners, there would be no Model 3. Plain and simple, plus Tesla doesn't owe anyone a tax discount. That's on the federal government.

Really, people, please don't forget about Roadster owners. We were omitted in the title of this thread, but we qualify for Model 3 priority order, too. Original Roadster owners (I'm not an original owner, I bought used) had a little something to do with getting the Model S into development, too.

 

[Fallenone]

That's assuming a very fast ramp up on production (which I doubt will happen. The phaseout really should be on numbers of cars, like 250k at full credit, 100k at half, 100k at 1/4 and then none. Because tesla has to ramp up production unlike other automakers, they maybe sell 400k cars under credit if they ramp really quickly, or they may sell 250k under credits if it's a slow rollout.

So here's another wrench in this idea of existing owners getting priority: What about investors? What about the little guy that can't afford a Model S/X but invested some cash into TSLA in hopes of at least being first in line and getting one of the first Model 3s? Now they get pushed back in line. I'm slightly obsessed with Tesla so I guess I'll suck it up and accept that I may not get my car as soon as I've been hoping for the past couple years AND may miss the tax credit, but the average Joe that more casually watches them, invested in them and waited patiently, but couldn't buy the Model S/X would have good reason to be mad about this decision.

Investors, even those bought at the near $300 level, should be able to get a "free" Model 3 for the return on their investment in late 2017 if the company does what it says.