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Most US Reservation Holders will get the full US incentive

Most US Reservation Holders will get the full US incentive

As of the end of 2015, Tesla had sold 50K cars in the US. They're predicted to make another 35K US sales in 2016 and 50K US sales in 2017. So the worldwide sales have no impact on whether you get the full US incentive or not. The US Roadster, S, X, and 3 sales do impact whether you get the full US incentive.

That means that at the start of 2018, they'll have made 135K US sales.

The incentives don't immediately end when Tesla crosses the 200K mark. The full incentive continues until the end of the quarter after the quarter when the 200K mark is crossed.

If they manage to cross the 200K mark in Q1 2018, that means they're making the cars very quickly - they made at least 65K cars in Q1 if they managed to cross that mark then. Presumably, if they make a different amount of cars in Q2, it'll be because they're going faster, not slower.

So in the scenario where they cross the 200K mark in Q1 2018, at least the first 130K Model 3's will have the full incentive. That's the number of reservations that had been made as of the Model 3 event ending last night (it has climbed to 150K since then... those people may not get the full incentive, but they'll be part of the 130K+ who get the 50% incentive that lasts until the end of 2018).

If Tesla crosses the 200K mark in Q2 2018, it means they made at least 65K cars in those two quarters. I think it's safe to guess that they'll make another 35K in Q3 2018, which covers at least the first 100K Model 3's with the full incentive. That covers all but 15K of the people who made their reservations before Musk made his announcement partway through the Model 3 event last night.

So the faster you think the 200K mark is going to be crossed, the more people will get the full incentive.

On the flip side - the slower Tesla is to make your car, the more time you have to save up so that you don't need as much of an incentive.

Also... I kind of suspect that the projected S and X sales for the rest of this year and next year are going to be off. I think the fact that we've already seen the Model 3 is going to put downward pressure on the sales of Tesla's existing cars. So they'll start the Model 3 production with even more space until they cross the 200K mark. I think last night was "Part 1 of 2" to kind of mitigate this and keep sales of the S and X from plummeting... but you know how they talked exclusively about the base Model 3? The base Model 3 sounds pretty much identical to the base Model S, except it costs half as much. I suspect that the high end Model 3 is going to sound like the high end Model S, but at half the price. They're saving details of the high end Model 3 to have an illusion that the Model 3 is going to be inferior to the Model S, when in fact that Model S is going to be discontinued entirely and the Model 3 is going to be its vastly cheaper successor.

dsvick | April 1, 2016

"As of the end of 2015, Tesla had sold 50K cars in the US. They're predicted to make another 35K US sales in 2017 and 50K US sales in 2018."

Are they taking 2016 off? :)

hikelarson | April 1, 2016

I agree nearly everybody will get the credit. The only possibility of people not receiving the credit will be people who sign up months from now, order a base model and live on the east coast. Like with any popular item, a lot of people want to be associated with it, but i bet more than 25% of the people dont actually purchase the car.

taylor | April 1, 2016

@dsvick - My bad. I meant 35K in 2016 and 50K in 2017 - off by 1 year for each of those numbers. There's no way to edit posts on here, is there?

pols_jr | April 1, 2016

I hope so it turns out that way. I placed the order the moment online reservation opened up at 7:30 PM EST. But even otherwise its a great car.

pols_jr | April 1, 2016

Oops I mean 7:30 PM PST :)

TeslaTap.com | April 1, 2016

I agree with your assessment on the number of cars and incentive timing.

I don't agree the Model 3 will bet the same as the base Model S. The Model S will not stand still, and new features will be added in the next two years to keep it competitive. Just like every other car maker there are various price points and features. The Model S is larger and has features not on the 3, such as instrument panel, 17" vs 15" center screen, higher performance, more range, more cargo space, etc.

There is even room for a Model 3 version that is close or even exceeds some features of the base Model S. BMW has been doing this for years very successfully.

OHMY | April 1, 2016

Also, Tesla could game the system and hold back #200,000 until they have a huge inventory then release the hounds all at once,

MaverickR | April 1, 2016

@OHMY - That would be great for Tesla customers but I doubt if they could/would do that.. First off 200K cars is a lot of revenue to hold back for Tesla. Secondly the Government may not look at Tesla very favourably for doing that. Just my 2 cents..

Rasorsmr2 | April 1, 2016

@Prashant.shanbhag they dont have to hold off 200K cars worth of revenue, just the number 200,000 car.

MaverickR | April 1, 2016

@Rasorsmr2 - Makes sense. Looks like I misread @OHMY's answer.

MaverickR | April 1, 2016

@Rasorsmr2 - Makes sense. Looks like I misread @OHMY's post.

nikhil48 | April 1, 2016

taylor, where did you read that end of quarter after 200K mark thing?

This post is making me suspicious that its an April fool's joke.

dsvick | April 1, 2016

@nikhil48 here are all the details:

Ok, it wont let me post the link, do a google search for IRS ev credit, it'll be the first or second link.

BoRidge | April 1, 2016

I agree 100% with Taylor's read. Moreover, the IRS article supports it:

"The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”)."

Maybe I'm giving the folks at Tesla too much credit, but it seems liked they may have planned it this way as part of the "master plan." By setting up the release of the 3 to correspond with when they hit the 200k mark, they award early adopters that put a deposit down.

BoRidge | April 1, 2016

I agree 100% with Taylor's read. Moreover, the IRS article supports it:

"The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”)."

Maybe I'm giving the folks at Tesla too much credit, but it seems liked they may have planned it this way as part of the "master plan." By setting up the release of the 3 to correspond with when they hit the 200k mark, they award early adopters that put a deposit down.

Octagondd | April 1, 2016

I don't agree with the projected domestic sales. They are projecting 90,000 cars in 2016 total. Most estimates have it as 50% domestic. They have been increasing production for S and X at a bout 60% per year, so 2017 could be a total of 150,000, with 75,000 domestic. That is 120,000 domestic in 16 and 17 and adding the 50000, leaves about 30000 before hitting the 200,000. My guess is very few Model 3 's will be made in 2017. Model 3 Reveal and production will probably be near the end of Q4 in my opinion.

The other issue here is that current Model S and X owners get in line before any Model 3 reservation holders, as well as SpaceX and Tesla employees. That will make a huge difference in what your reservation number is.

I do agree with the tax stuff though. If they hit 200000 at the beginning of a quarter, then there is basically 6 months of production that still receives 100% of the credit. If they make 240000 cars in 2018 and 120000 are domestic, lets assume 80000 of those are Model 3's. That would be 6666/month and could potentially be 40000+ more Model 3's that get the full credit. The highly optioned on the West coast will be first. It is still to be determined if they roll out the highly optioned across the country before going more to the base models back on the west coast again, or if they will handle all west coast orders first.

If production does start end of 17 or early 18, I think about 50-60000 Model 3's could get the full credit. How many of those will be new customers and non-Tesla/SpaceX employees remains to be seen. If someone was first in line on the West Coast and wants a fully optioned version, that is the best bet to getting the full credit.

Another 30000 vehicles will get 50% credit in the 3rd quarter after 200,000, so maybe 120000 Model 3's and then another 30000 will get 25% credit with possibly12000 Model 3's.

I am not holding my breath for the federal credit. I reserved half way through the day in California. It all depends on how many units current Tesla Owners/employees purchase.

Octagondd | April 1, 2016

Edit - In second to last paragraph I accidentally added a zero to the number of Model 3's that could get the 50% credit. It should be 12,000, just like the 12,000 that could potentially get the 25% credit.

Octagondd | April 1, 2016

Edit - AGAIN - God I am horrible

The math is wrong at the end. It should be about 20000 Model 3's that may get the 50% credit and 20000 that may get the 25% credit.

So to sum up, I believe maybe 50000 Model 3's will get 100% credit and 40000 will get partial credit. This is all of course based on the not so solid assumption of Production starting in late 17 or early 18.