Tesla Will Cover Federal Tax Credit Difference On Cars Not Delivered Before 2019

Tesla Model 3 1 photo
Photo: Tesla
Like General Motors, Tesla has a problem. Not with the Palo Alto-based automaker’s electric cars, but with the $7,500 federal tax credit the Trump administration plans to kill off.
Barack Obama set the goal for the U.S. to have one million EVs on the road by 2015 in his State of the Union address from 2011, and based on the current legislation, time’s up for Tesla. The phase-out period is in effect for vehicles delivered before January 1st, 2019, after which customers will be eligible for $3,750 until June 30th. Between July 1st and December 31st, the federal tax credit decreased to $1,875.

Tesla delivered the 200,000th electric vehicle in July 2018, and General Motors is understood to have reached the cap this month. As if the biggest of the Big Three in Detroit wasn’t trying to catch up to Tesla, Elon Musk decided to add insult to injury with a well-worded tweet.

More to the point, orders for cars placed by October 15th are eligible for the $7,500 fderal tax credit. If the customer receives his Model 3, Model S, and Model X after December 31st, then Tesla “will cover the tax credit difference.” Elon Musk is talking about “good faith” in regard to this matter, which is curious considering the scores of quality issues affecting the Model 3.

General Motors hasn’t come up with a solution to the halving of the federal tax credit, nor has it delivered the two Bolt-based electric crossovers announced with great pomp and circumstance not that long ago. In order to keep shareholders happy, Mary Barra would rather close plants and phase out slow-selling models from the lineup instead of adjusting to what the desires of the customers.

The big question is, what will Tesla do starting from December 31st, 2019? With no incentive to switch from fossil fuels to electricity, there’s one outcome that Elon Musk has to take into consideration. Cheaper cars is the name of the game, and it’s possible if the production process for the Model S and Model X replicates that of the Model 3.

Another thing that must be highlighted is that the Model 3 without the federal tax credit pits the electric sedan in the arena that’s dominated by the German triad. Even if Audi, BMW, and Mercedes-Benz are lagging behind Tesla in terms of EV technology, it’s time we accept that a $35,000 sedan isn’t affordable for the masses. As time ticks away, Tesla has to understand that a mass-market EV is the way forward, more so if you remember that Volkswagen plans to start production of the ID. in November 2019.

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About the author: Mircea Panait
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After a 1:43 scale model of a Ferrari 250 GTO sparked Mircea's interest for cars when he was a kid, an early internship at Top Gear sealed his career path. He's most interested in muscle cars and American trucks, but he takes a passing interest in quirky kei cars as well.
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