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When Does Tesla Reach the 200,000 US Mark (end of fed tax credit)?

When Does Tesla Reach the 200,000 US Mark (end of fed tax credit)?

I've seen some quick calculations here and there, but would love to see your opinion and calculations on how many Model 3s will be eligible for the federal tax credit of $7,500 when production finally gets underway in late 2017 or early 2018.

Why do I care? Because I'm going to be a Model 3 owner -- near the front of the line; let me just elbow my way in!

Red Sage ca us | March 16, 2016

I haven't tried to calculate it fully anymore, with the slow, steady, and much delayed rollout of the Model X. By the way, it doesn't just end fully at 200,000 units. The following 2nd quarter it would begin to slowly phase out... 50% for six months... 25% for six months... And then gone thereafter.

carlk | March 16, 2016

By end of 16' Tesla would have sold ~200K cars with maybe half of them sold in the US. I don't think it will reach the 200K mark the first quarter M3 is for sale, assuming it will be end of 17' or even a little later. Long as you're at front of the line I think you will be able to get it. Every car purchased in the quarter that sales reached 200K, even a million is sold in that quarter, would qualify.

PhillyGal | March 17, 2016

@Carlk - To that point I think Tesla would really try their hardest to prioritize US orders in that quarter to squeeze in as many as possible.

@All
Is it possible that this tax credit gets renewed? I think I heard we were supposed to elect a new President this year.

Hi_Tech | March 17, 2016

I wouldn't be surprised if the credit did get extended.

I do have a question about how the credit works: What happens if you buy 2 EVs in one year? Are you still limited to the $7,500 total for the year, or do you get $7,500 for each vehicle?

Thanks.

KP in NPT | March 17, 2016

I don't see the credits getting extended unless we end up with a democrat majority congress after the election. But I would love to be wrong.

Rocky_H | March 17, 2016

@HiteshBhatt, It is only one tax credit per year, regardless of how many vehicles you buy in that year. What I don't remember, and maybe others can fill this in. Can you do it year after year? I thought I remembered that it was one time per household, but I may be wrong about that. I'm sure there are others on this forum who could tell you how that worked when they got their second Tesla.

Blueshift | March 17, 2016

Assume Tesla sells its 200,000th vehicle in 2016 Q4, then:

2017 Q1: $7,500
2017 Q2: $3,750 (phase out begins in 2nd quarter after 200k sold)
2017 Q3: $3,750
2017 Q4: $3,750
2018 Q1: $1,875
2018 Q2: $0

Blueshift | March 17, 2016

Correction:

2017 Q1: $7,500
2017 Q2: $3,750 (50%, phase out begins in 2nd quarter after 200k sold)
2017 Q3: $3,750 (50%)
2017 Q4: $1,875 (25%)
2018 Q1: $1,875 (25%)
2018 Q2: $0 (0%)

Blueshift | March 17, 2016

Full details can be found by searching for: Plug-In-Electric-Vehicle-Credit-IRC-30-and-IRC-30D

SUN 2 DRV | March 17, 2016

Blueshift: You should mention that what's counted is sales in the US....

CarlK's estimate was for 100k of US sales by the end of 2016.... I don't think anyone's proposing 200k of US sales by the end of 2016.

Blueshift | March 17, 2016

Ah yes, US sales. So push the timeline above down by a couple (a few?) quarters.

Haggy | March 17, 2016

I've already written to my congressman about the current rules and saying how it's anti consumer. The point is supposed to be to get consumers to adapt to EVs, and the benefit doesn't go to the manufacturer. So putting consumers in a position where they can't get the car they want because of how many others bought it makes no sense. It shouldn't be about giving other manufacturers an unfair advantage. Buyers should get the credit no matter which car they buy until the market as a whole has reached a critical mass, at which point any manufacturer could sell cars on equal terms because EVs wouldn't be a foreign concept.

SUN 2 DRV | March 17, 2016

Haggy +1 Very good points about why it should be based on EV market totals and not per manufacturer.

stevenmaifert | March 17, 2016

@Rocky_H - "It is only one tax credit per year, regardless of how many vehicles you buy in that year." Do you have a reference for that? I took delivery of my MS and a Leaf in tax year 2012 and filed for both cars. Even the IRS Form
8936 has an (a) and a (b) column for two cars. See my legislation reference below. "ALLOWANCE OF CREDIT.—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to EACH new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year."

@mp1156 - There are folks here who love to bash the Republicans, but did you know the 200K U.S. sales per manufacturer limit was actually imposed by a Democratic congress (House and Senate) and signed into law by a Democratic president? It's in Part V, Section 1141 of "The American Recovery and Reinvestment Act of 2009" (aka Obama Stimulus). Ref: http://www.gpo.gov/fdsys/pkg/BILLS-111hr1enr/pdf/BILLS-111hr1enr.pdf Part V, Section 1141 starts on pg. 212 of the PDF file and the 200K limit for the credit phaseout is on pg. 213.

Red Sage ca us | March 17, 2016

stevenmaifert: Uhm... Yeah... But, if you recall, President Obama mistakenly believed the traditional automobile manufacturers would be open to building plugin vehicles and that it would be 'no problem' to have around 3,000,000 electric or 'electrified' vehicles on US roads by 2020... With dozens of manufacturers and 200,000 each, he figured they'd meet the goal.

Reality was that the Chevrolet VOLT didn't even sell through 90,000 units in its first five years. And to date, even Nissan LEAF has only just passed 91,000 units sold. Most plugins from other traditional automobile manufacturers are far, far behind those two.

Methinks that if President Obama had been aware of the sheer level of reluctance that was held by the automotive industry toward the prospect of fully electric vehicles, the bill may have been crafted in a different manner.

Hi_Tech | March 17, 2016

@stevenmaifert - Thank you for the link and the information.

Interesting points I get out of reading it are:
1. the credit is per electric vehicle (therefore, you can buy 2 for $15k credit, etc.)
2. the phase out is based on the quarter in which the 200,000th car is sold; so, for example, if this occurs on 10th Jan 2018, then all cars sold by 31st Mar 2018 are at 100%,, then from 1st Apr - 30th Sep 2018 are at 50%, etc. Therefore, it would include far more than 200k at 100%.

stevenmaifert | March 17, 2016

Red Sage ca us - Perhaps, but as I recall that bill was written primarily by lobbyists looking for their piece of the nearly trillion dollar "stimulus". I also think the Prez missed his opportunity to make the purchase incentive a point of sale rebate instead of a tax credit that only those who have at least $7500 tax liability can take advantage of. Would have done more to help that "middle class" that he cares so much about.

stevenmaifert | March 17, 2016

I should have said "can take full advantage of"

stevenmaifert | March 17, 2016

@HiteshBhatt - Actually I think it's even better than your example suggests.

Per IRS IRC30D "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" So if the 200,000th vehicle is sold between Jan 1 and Mar 31, the first calendar quarter after that quarter is Apr 1 - Jun 30. Everybody is still getting the full tax credit. The second calendar quarter is Jul 1 - Sep 30 which is the quarter the phase out period would begin.

"Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period; Jul 1 thru Dec 31. "and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period."; Jan 1 thru Jun 30.

Anyway, that's how I interpret the verbiage.

buickguy | March 17, 2016

I've been doing a little "research" in the number of Teslas delivered in the USA which are eligible for the $7500 tax credit. I will admit that my "research" does not involve any data directly from Tesla, except for some snippets derived from SEC filings. However, those were only slightly helpful. Here is my SWAG as to Tesla USA deliveries --

Thru 2012 = 5,000
2013 = 12,000, therefore the running total = 17,000
2014 = 18,000, running total = 35,000
2015 = 50,000, running total = 85,000
2016 = 80,000, running total = 165,000 (80,000 = 55,000 Model S and 25,000 Model X)
2017 = 120,000, running total = 285,000 (120,000 = 70,000 Model S and 50,000 Model X)

It looks to me that Tesla will reach its 200,000 limit in early 2017, well before the Model 3 rolls off the assembly line. What figures do you have?

jbunn | March 17, 2016

Buickguy,

You scared me there, but It looks like you're using total global deliveries. You need to use only the US deliveries for each year.

KP in NPT | March 18, 2016

@stevenmaifert - not meaning to bash republicans - but since it was democrats that gave us what credit we have, and they are traditionally more in favor of environmental issues including the advancement of EVs (thus the credit) I am just saying it's unlikely that there will be an extension or change to allow them to keep happening unless they retake the majority. But if I'm wrong in my opinion then that would be great.

Personally I do wish it had been written to recognize no manufacturer - maybe a total number of EVs on the road instead.

Hi_Tech | March 18, 2016

Trying to stay politically neutral -
The best chance to have the credits extended is to show a successful launch of these products. Right now, it is easy for anyone to argue (though incorrectly) that EVs are not worth the investment and they have failed. But, if there can be a several companies that build out products that customers want (reasonable priced for reasonable range, etc.), then we start taking away that argument, and provide a strong argument for extending.

Rocky_H | March 18, 2016

@stevenmaifert, Whoa, I am so sorry. You are right. I didn’t have a reference for it; I just remembered hearing/reading it a few places over the years, so I was just sure it was well known. But I checked the references, and I see that you are right, that multiple EV credits per year are allowed. Thanks for correcting that.

stevenmaifert | March 18, 2016

@mp1156 - You don't often hear it discussed this way, but there is a school of thought that says the reason it's per manufacturer is because the Federal tax credit is actually a back door subsidy to the manufacturers that allows them to inflate the price of the vehicle to incentivize and pay for EV technology R&D and manufacturing start-up costs and to get more manufacturers producing plug-ins. Consumers recover that inflated price through the tax credit. I don't know if that's true, but in 2005 I purchased a Toyota Camry Hybrid. Toyota hit the magic number sometime prior to my purchase so I missed out on the $1000 tax credit, but to compensate, Toyota lowered the MSRP by $1000. Since no manufacturer has hit the 200K mark yet on the current Federal tax credit, it remains to be seen if there will be any price lowering, but I think there may be some since there is evidence that shows EV sales slump when you take away a generous purchase incentive. Georgia comes to mind when they took away the state incentive.

KP in NPT | March 18, 2016

@stevenmaifert good point and yes I have heard this mentioned. It will be interesting to see how all manufacturers react once their 200k is hit.

I'm not seeing Tesla lowering the price to match the loss of credit. Maybe ill be proven wrong - but if anything I see instead them offering more tech for the same price. We'll see.

carlk | March 18, 2016

One thing Tesla could do to help is stop delivery after reached 199,999 then produce and inventory the next million cars to be delivered all in one quater. That way a million people would all get the tax credit. Just a random thought.

Red Sage ca us | March 18, 2016

Trying yet again to post this chart:

buickguy | March 18, 2016

@jbunn, no, sorry, these are USA deliveries only. Obviously, 2016 and 2017 figures are mostly my speculation, but the 2015 number is a good figure.

Rocky_H | March 18, 2016

@carlk, What an evil genius move!

TSLA4Tesla | March 18, 2016

@stevenmaifert, great points. Loved to read this thread and it makes me feel like an expert on this matter ;) Great info!
I sort of agree with the logic behind 200,000 vehicle limit per manufacturer. Your logic about price getting inflated by manufacturer makes sense. If the price is not inflated, the demand gets a boost because of the credit. If the demand curve is not shifted, the volume of sell will be lower (not a problem for Tesla so far). To get to the same volume in the world with no rebates, the price would need to be lower! As a consumer I might think I got the benefit of the rebate/credit, but now I know it is actually Tesla which got the money! When I bought my Tesla, I always considered the price to be $10k less after $7.5 federal tax credit and $2.5k California rebate but I actually did pay out that to Tesla up front! Tesla got full purchase price.
Unfortunately, most of my friends who are looking to book/buy Model 3 are counting in 10k rebate! Many are excited by a 200 miles Tesla EV at $25k! Good for Tesla that they would get lots of bookings/preorders from such people who have 25k price tag in mind! I was searching for info on the federal credits and it brought me to this post! Thanks again for wonderful information! I think Tesla is going to book 150,000 model 3 cars at launch..and stock price shooting to $250 ;)

SUN 2 DRV | March 19, 2016

buickguy; You need to check again.... Your 2015 and 2016 numbers are clearly the WORLDWIDE totals. Some of your earlier numbers seem right for US only....

buickguy | March 19, 2016

@joe and others seem to be correct in that USA deliveries have been lower than I first projected. Here's a revised projection after rereading Tesla's SEC and other public filings --

Thru 2012 = 5,000, including Roadster
2013 = 12,000, therefore the running total = 17,000
2014 = 18,000, running total = 35,000
2015 = 25,000, running total = 60,000
2016 = 42,000, running total = 102,000 (based on Tesla's average forecast)
2017 = 55,000, running total = 157,000 (based on my SWAG; Tesla does not have a public 2017 forecast)

This leaves 40,000+ USA deliveries under the 200,000 mark for 2018. That's room enough for my Model 3. See you in line on March 31!

stevenmaifert | March 19, 2016

@buickguy - Remember, every Tesla delivered in the first quarter following the quarter they reach 200K USA deliveries still qualifies for the full $7500 Federal tax credit. Great incentive for Tesla to ramp up M3 production quickly.

Mel. | March 19, 2016

mp1156.
Not wanting to disagree with a fellow Tesla enthusiast, but could you tell us what democrats you are talking about? what credits were put in place that a democrat signed that benefit a Tesla buyer?

I would have been very happy if President Obama put any bill forward that could have supported Tesla. But I believe he never had an interest.

AJPHL | July 18, 2018

Spam bump...interesting to note the tax credit speculation from 2+ years ago and how the projections worked out....

andy.connor.e | July 18, 2018

Alot better than people thought.