Tax Credit Clarification

[MikeDog77]

The only date that's going to matter at this point is 3/31/2018 and 30-35K Model 3 deliveries. If Tesla can't make 30K Model 3 deliveries in the next 6 months, then that's going cast doubt on scaling and/or supply chain capabilities.

I don't think Tesla is planning on international delivery until late 2018, so it's not like they can offset sales internationally.

Agreed 100%. With S's and X's selling consistently Tesla will be right around 150k in USA at the end of 2017. they will sell another 15k S's and X's in 1Q 2018. So the only question is can they make 30-35k M3 in the next 6 months. I would think/hope they reach this pretty comfortably around mid February, 2018. And as Troy shows the 2 options perfectly, that would put it end the full tax credit on June 30th, 2018.

@Troy the only thing I would disagree with is your 50/50 chance. I would personally put the over/under on 35k M3 around February 15th.(based on being 1 month behind but still most likely to hit close to 5,000 cars per week the last week of December.)

 

[dgpcolorado]

I don't think Tesla is planning on international delivery until late 2018, so it's not like they can offset sales internationally.

Perhaps not overseas, but Tesla could start delivering some 3s to Canada to delay USA deliveries a bit for tax credit purposes.

 

[ericonline]

@Troy the only thing I would disagree with is your 50/50 chance. I would personally put the over/under on 35k M3 around February 15th.(based on being 1 month behind but still most likely to hit close to 5,000 cars per week the last week of December.)

At the rate their selling the MS/MX the magic number for M3 sales is probably closer to 25k. The improved 0-60 times combined with all the new standard options has made the MS/MX a great value. Keep in mind the expiring tax credit will also spur MS and MX sales. And as we get closer many mid to late Reservation Holders will simply buy a MS/MX.

Unless M3 production is a complete debacle, 200k gets hit in Q1. Bad news for a lot of folks hoping to get the 35k version with the full credit.

 

[gregincal]

At the rate their selling the MS/MX the magic number for M3 sales is probably closer to 25k. The improved 0-60 times combined with all the new standard options has made the MS/MX a great value. Keep in mind the expiring tax credit will also spur MS and MX sales. And as we get closer many mid to late Reservation Holders will simply buy a MS/MX.

Unless M3 production is a complete debacle, 200k gets hit in Q1. Bad news for a lot of folks hoping to get the 35k version with the full credit.

Don't see why you say that. That's a lot of full credit 35K versions they're going to be making.

 

[ericonline]

Don't see why you say that. That's a lot of full credit 35K versions they're going to be making.

Agreed. But first they'll deliver Long Range versions. How many 35k versions do you think they'll deliver by June 30, 2018?

 

[gregincal]

Agreed. But first they'll deliver Long Range versions. How many 35k versions do you think they'll deliver by June 30, 2018?

I think at least enough to satisfy all first day US reservers who want one. Beyond that it's hard to say.

 

[gambit48]

Perhaps not overseas, but Tesla could start delivering some 3s to Canada to delay USA deliveries a bit for tax credit purposes.

That's my guess as well. Maybe not overseas internationally (or even Mexico), but on the off chance that they can produce way too many 3s that would push them over 200k and are close to the end of a particular quarter, I can see them offloading some to Canada (or just withhold them if they can and "deliver" them right after the new quarter starts). I gotta think the big cities in Canada have quite a few reservations and the changes to certify them for Canada can't be too onerous, right? Maybe some tail lights and different seat belts for the most part?

 

[Trips]

Electrek is reporting "Sources familiar with Tesla’s North American sales confirmed that Tesla recently reached just over 140,000 cars delivered in the US. That’s mainly Model S and Model X vehicles – with a few Model 3 vehicles." - October 5th 2017

That would have them reaching 200,000 deliveries at the end of Q1 2018 and most likely holding them back until Q2. That would put the line waiters wanting Dual Motors in the full tax credit range. I believe that Elon Tweeted months ago that most line waiters wanting Dual Motors should get the full credit.

Do I wait and risk it as I do not want to pay $8,750 extra for AWD.

Tesla buyers to have access to federal tax credit well into 2018 as US deliveries reach over 140,000 units

 

[burnside]

Electrek is reporting "Sources familiar with Tesla’s North American sales confirmed that Tesla recently reached just over 140,000 cars delivered in the US. That’s mainly Model S and Model X vehicles – with a few Model 3 vehicles." - October 5th 2017

That would have them reaching 200,000 deliveries at the end of Q1 2018 and most likely holding them back until Q2. That would put the line waiters wanting Dual Motors in the full tax credit range. I believe that Elon Tweeted months ago that most line waiters wanting Dual Motors should get the full credit.

Do I wait and risk it as I do not want to pay $8,750 extra for AWD.

Tesla buyers to have access to federal tax credit well into 2018 as US deliveries reach over 140,000 units

I'd wait. Worse case scenario is you receive $3,750 credit instead of $7,500.

 

[ericonline]

Electrek is reporting "Sources familiar with Tesla’s North American sales confirmed that Tesla recently reached just over 140,000 cars delivered in the US. That’s mainly Model S and Model X vehicles – with a few Model 3 vehicles." - October 5th 2017

That would have them reaching 200,000 deliveries at the end of Q1 2018 and most likely holding them back until Q2.

I believe the end of September total is close to 146,000. But let's assume it's just 140,000. Last Q4/Q1 Tesla delivered 24,075 cars in the U.S. according to IEV. For a variety of reasons MS/MX sales have been and will likely continue higher than last year's pace (Increased 0-60 times/Many standard features added, Expiring tax credit, M3 switchers). If they deliver about 30,000 MS/MX over the next two quarters, Tesla would hit the 200,000 mark if they deliver 25,000-30,000 M3s by March. Unless these production bottlenecks are much worse than Tesla is claiming, hitting the 200,000 mark after Q1 seems pretty unlikely.

If they tried to game the system too dramatically by withholding 10,000+ cars in March then delivering them in April they might catch a lot of heat from the government, competitors, etc. I suspect if the target is close enough they can actually start "anti-selling" the MS/MX for a few months. They've already taken a few small steps in this direction. Discontinued the MS75 RWD - the cheapest MS, so the entry level price is $5,000 higher. Eliminating the $1,000 referral credit after this month. Maybe they'll even raise the price in conjunction with a battery upgrade? Tesla would lose a few sales in the short term, but they could easily make up for it by getting a lot of the middle reservation holders to upgrade to the Long Range M3 with the extra options.

 

[MikeDog77]

Tesla will not hold back any car deliveries because of the tax credit unless it is really close. Remember Production Hell is going to be replaced with Delivery Chaos as Tesla doubles the amount of deliveries it will make with the M3. They aren't going to slow that process down if they have it running smooth here in the next 6 months. Seems like everyone agrees on the math that they need to deliverer somewhere between 25-35k M3 in the next 6 months, and lets hope that that is not a problem for them. The tax credit is designed beautifully to phase out and give people plenty of time to adjust what they are planning to buy.

 

[ericonline]

Remember Production Hell is going to be replaced with Delivery Chaos as Tesla doubles the amount of deliveries it will make with the M3

After Production Hell and Delivery Chaos, I can only imagine what we see at the Service Centers and Superchargers.

 

[206er]

Tesla will not hold back any car deliveries because of the tax credit unless it is really close. Remember Production Hell is going to be replaced with Delivery Chaos as Tesla doubles the amount of deliveries it will make with the M3. They aren't going to slow that process down if they have it running smooth here in the next 6 months. Seems like everyone agrees on the math that they need to deliverer somewhere between 25-35k M3 in the next 6 months, and lets hope that that is not a problem for them. The tax credit is designed beautifully to phase out and give people plenty of time to adjust what they are planning to buy.

Let's just hope that the tax credit stays in place and tax reform doesn't torpedo it early.

Anyone think that GM could be powerful and diabolical enough to try to lobby congress or the president to target the tax credit while they rush some lackluster $25k, 200-mile EV weirdmobile to market? That's be big trouble for the Model 3, and Tesla.

 

[voip-ninja]

Honestly it would be great for me personally if they didn't hit the 200K number in Q1 of 2018. I would prefer to take delivery of AWD in September/October of next year and still get the full tax credit. It also gives them more time to work bugs out on the product and do their normal quarterly thing where stuff gets quietly upgraded with little fanfare.

 

[Bokonon]

Do I wait and risk it as I do not want to pay $8,750 extra for AWD.

I presume you have an early reservation. If that's the case, then we're both in the same boat, and we have the advantage of being able to wait and see what happens in the coming months. I suspect that we'll start getting an idea of AWD specs (and, hopefully, pricing) sometime in mid-to-late Q1, just before it goes to production. Car #200,000 could (should?) be delivered around the same time.

With that timing in mind, I have a decision tree that I will start to navigate at the end of Q1, and it looks something like this:

(FWIW, "200K cars delivered?" also includes the question, "Tax credit eliminated via legislation?")

At present, most roads (and the likeliest roads) seem to lead to RWD for me, as much as I'd like to find a way to land at the AWD endpoint. Again, though... we reservation-holders at least have the privilege of being able to wait and see how things pan out before we're forced to make a decision.

 

[T-Will]

I'm a late reservation holder, so I'm planning for a $3750 credit in my cost analysis, but would be pleasantly surprised if I end up with the full $7500 credit.

 

[bhzmark]

Let's just hope that the tax credit stays in place and tax reform doesn't torpedo it early.

Anyone think that GM could be powerful and diabolical enough to try to lobby congress or the president to target the tax credit while they rush some lackluster $25k, 200-mile EV weirdmobile to market? That's be big trouble for the Model 3, and Tesla.

< 1% chance.

If other car mfrs are paying attention they will like and want the the time period where Telsa's credit expires and while GM has the benefit of the credit as they more slowly approach 200k US sales. Then they can compete with Telsa with $7500 govt subsidy which Tesla won't have.

And usually tax reform changes taking away benefits won't disrupt current and the very next year, but usually have some transition period to be in place in future years.

A way to really game it would be spinoff a new company to sell M3 to get its own 200k in US sales.

 

[S3XY]

< 1% chance.
If other car mfrs are paying attention they will like and want the the time period where Telsa's credit expires and while GM has the benefit of the credit as they more slowly approach 200k US sales. Then they can compete with Telsa with $7500 govt subsidy which Tesla won't have.
And usually tax reform changes taking away benefits won't disrupt current and the very next year, but usually have some transition period to be in place in future years.
A way to really game it would be spinoff a new company to sell M3 to get its own 200k in US sales.

I don't think this is possible. Affiliate sales are included in the total.

 

[gregincal]

< 1% chance.

If other car mfrs are paying attention they will like and want the the time period where Telsa's credit expires and while GM has the benefit of the credit as they more slowly approach 200k US sales. Then they can compete with Telsa with $7500 govt subsidy which Tesla won't have.

And usually tax reform changes taking away benefits won't disrupt current and the very next year, but usually have some transition period to be in place in future years.

A way to really game it would be spinoff a new company to sell M3 to get its own 200k in US sales.

GM might hit the limit one quarter later than Tesla, but that would be it. Basically if any manufacturer sees enough of an advantage to take away any meaningful percentage of Model 3 sales, then by definition they will quickly hit the limit themselves and the advantage will be short lived. Otherwise, is it really much of an advantage if not many people are buying your cars?

 

[wdolson]

The tax credit for GM will either expire the same quarter as Tesla, or the next, and Nissan will probably be a quarter later than Tesla or two at the most. That puts those car makers at a big disadvantage trying to compete with Tesla if the M3 turns out to be the big hit that it might be.

It's been a very long time since any car has shown the potential to take off like the M3 might. There have been cars the automotive media went ga ga about, and there have been cars that sold well, but when a car company comes out with a new car, they usually are looking at a few percentage improvement in sales if they are lucky. Tesla could easily see 100% increased sales the first year of the M3.

The cars that still qualify for the tax breaks might be able to sell a few more cars on price, but with GM's expiring and then Nissan's, the two biggest competitors to Tesla will be competing without tax breaks vs a number of competitors offering similar cars that are cheaper.