Tesla Will Cut Prices To Combat Tax Credit Phase Out (cnn.com)

Tesla is cutting its car prices in the United States by $2,000 to combat a cut in a federal tax credit for its buyers. "Tesla triggered the tax credit phase-out in July when it became the first car maker in the United States to sell more than 200,000 plug-in vehicles," reports CNN. "The government designed the credit to be phased out for each automaker once it reaches that milestone." From the report: Before that benchmark, Tesla buyers were entitled to a tax credit of $7,500 for purchasing a plug-in electric car. But as of January 1, Tesla buyers will only get half that credit, or $3,750, for the next six months. The credit falls to $1,875 in July, and then disappears in 2020. The tax credit phase-out comes just as Tesla was preparing to sell a $35,000 version of its Model 3 sedan, the first time it will be taking aim at the price-conscious mass market. CEO Elon Musk said in an interview on "60 Minutes" that he expects the lower-priced version of the Model 3 to be available in five to six months.

Tesla also reported strong production and sales for the just completed fourth quarter. Total sales were up 8% and Model 3 sales were up even more, about 13%, to 63,150 vehicles. That works out to an average of about 4,900 Model 3s per week in the quarter, putting it in range of its goal of 5,000 Model 3's a week.

Comments

That's Unpossible

[SuperKendall]

Tesla also reported strong production and sales for the just completed fourth quarter. Total sales were up 8% and Model 3 sales were up even more, about 13%

Slashdot assured me electric car sales were saturated and that electric cars were just a fad.

I don't think Tesla cares much at all that subsidies are fading out - that is as it should be. The subsidies did the job they were designed for, got Tesla off the ground and to a place where they can sell the car on merits alone without any tax advantages. There certainly are few other cars, period, I'd be interested in looking at these days.

Re:That's Unpossible

[swillden]

The subsidies did the job they were designed for, got Tesla off the ground and to a place where they can sell the car on merits alone without any tax advantages.

Maybe. Yes, they got Tesla going, but the goal of the tax credits was to incentivize Americans to shift to EVs. By that measure, the job is far from finished. It never made sense to me that the credit phased out on a per-automaker basis. It seems to me that if it makes sense to use tax credits for this purpose, the credits should continue until a certain percentage of all new car sales are EVs. Tesla, in particular, is on the edge of being able to really increase the EV numbers in the US. A $7500 credit on an $80K model S is nice, but the car is still far too expensive for most people. A $7500 credit on a $35K Model 3, on the other hand, drops the price to $27.5K, which is in range of a relatively large set of the US population.

I'd like to see Congress restructure the credit to continue until, say, 10% of new passenger vehicles are zero-emissions.

Re:That's Unpossible

[zlives]

what is this "$35K Model 3" you speak off

Re:That's Unpossible

[K. S. Kyosuke]

They want $35k for a 200 mile range car, when Hyundai and Kia have 260 mile range cars for closer to $30k

Hilarious. Are you talking about the Kona, for $30k - *after* the $7500 tax credit, manufactured at a fraction of the rate of Model 3? Originally planned 30000 vehicles per year! As many manufactured in a month as Tesla does in half a week...competition indeed? How is the $35k model "uncompetitive" against this? The waiting list for this is going to be even worse!

Re:That's Unpossible

[mspohr]

When they have 35% growth in 2017 and 93% growth in 2018, that doesn't seem like it's slowing.
https://www.fool.com/investing...

Re:That's Unpossible

[drinkypoo]

Maybe. Yes, they got Tesla going, but the goal of the tax credits was to incentivize Americans to shift to EVs. By that measure, the job is far from finished

Maybe. Or maybe we're past the tipping point. Maybe enough people already want them that they'll get cheap and ubiquitous enough that they'll run down to their price floor sooner than later.

It never made sense to me that the credit phased out on a per-automaker basis. It seems to me that if it makes sense to use tax credits for this purpose, the credits should continue until a certain percentage of all new car sales are EVs.

Or at least until a certain number of cars are sold, based on the budget available for the program. Whoever sells them first "gets" the credit.

Re:That's Unpossible

[swillden]

. It never made sense to me that the credit phased out on a per-automaker basis.

They want to encourage a healthy competition for e-Vehicles. The per-automaker basis encourages later entrants to get involved - it makes their cars cheaper and more affordable. So either they can price compete effectively with established players even if their initial costs of production are $7,500 more each, or lure customers away by offering a price competitive discount if it costs less than that.

Or, in summary, you have the goal wrong. It's not to incentivize Americans to shift to EVs. It's to incentivize EVs to exist to be shifted to

You really think that Ford and GM need help to compete with a tiny upstart like Tesla? A little price difference isn't what's holding them back, it's broader consumer interest. You want more EVs on the market, get more EVs on the street, regardless of who makes them, and then competition will build.

Re:That's Unpossible

[swillden]

Ford and GM don't. When another small upstart (that will probably eventually be purchased by Ford or GM) starts up, it'll need the help.

There won't be any more upstarts. Do you know how rare a thing a successful automaker startup is?

Re:That's Unpossible

[swillden]

Maybe. Yes, they got Tesla going, but the goal of the tax credits was to incentivize Americans to shift to EVs. By that measure, the job is far from finished

Maybe. Or maybe we're past the tipping point. Maybe enough people already want them that they'll get cheap and ubiquitous enough that they'll run down to their price floor sooner than later.

Given how weird average people think EVs are, I think we're still some way from that.

It never made sense to me that the credit phased out on a per-automaker basis. It seems to me that if it makes sense to use tax credits for this purpose, the credits should continue until a certain percentage of all new car sales are EVs.

Or at least until a certain number of cars are sold, based on the budget available for the program. Whoever sells them first "gets" the credit.

Sure, that works, too. Actually, my preferred alternative is to drop the EV subsidies and focus instead on removing the subsidies on fossil fuels, and then using taxation to internalize the externalities. For example, a carbon tax. It's quite difficult to accurately assess the full cost of fossil fuels, but I think we should take a stab at it. Honestly, whatever we come up with will probably be too low.

Re:That's Unpossible

[RhettLivingston]

The performance of the Tesla Model 3 is better than that of my wife's BMW 330ci and you're comparing it to the Hyundai and Kia offerings? That is nuts.

Many, many Tesla owners bought because they want an EV and love it because they got a fun family vehicle that outperforms most sports cars. This has been making a slow but sure change in the reason people really buy Teslas, for the thrill of it.

Re: That's Unpossible

[terrycarlino]

There are no teslas at the tracks for a reason.....

Yes that would be that the racing organizations have rules that prevent any car not using an internal combustion engine from qualifying, regardless of its capabilities. Its the same reason gas turbine vehicles are not allowed at the track, despite being superior in almost every way in the racing environment, if not on the road.

I'm not a rabid Tesla fan, or an EV fan either. They are a niche vehicle, only good for local transport. In that niche they are adequate, but still overly expensive for what they are. This will change as technology gets better and economy of scale kicks in.

Any one who is honest can't knock their performance though. The Model 3 3.3 sec 0-60. The Model S 2.5 sec 0-60 speed makes it the fastest production car in the world, equal to the famous Bugatti Veyron, which is no longer being produced and cost much more. So $78K compared to $1.5 million.

There are other incentive programs

[bobstreo]

Local electric providers around me have sent out a couple offers towards the purchase of a (I assume new) EV. Rebates and other incentives are available.

Of course if you got the full Federal tax credit on top of it all, it ended up quite good, considering the cost the of Nissan Leaf was only 23K.

I'm surprised Tesla didn't raise the price instead. There is a waiting list, so you could consider their products as high in demand, low in supply.

Time for fair play.

[Gravis Zero]

Since we're no longer subsidizing electric cars, how about we stop subsidizing oil for ICE cars too? How about we stop subsidizing coal too? Putting tons of CO2 into the air is currently 100% environmentally subsidized and that needs to end before it destroys our ecosystem. Instead, people need to start paying so that every gram of CO2 released is also being extracted. It's a market friendly solution to pollution but wouldn't you know it there are people who are against accepting personal responsibility for their own actions.

Re:Time for fair play.

[Solandri]

On a per unit of energy basis, the subsidies for renewables far, far exceed subsidies for fossil fuels and nuclear. If you factor in fuel taxes, there's a huge net tax on oil consumption. Zeroing those out to make for "fair play" would put renewables at a monumentally huge disadvantage.

EV owners are going to be hit by the fuel tax portion of this in the coming years. Fuel taxes are used to pay for construction and maintenance of roads. EVs, by virtue of not using gasoline, are not paying for the roads they ride upon. So as the percentage of EVs on the road increases, the amount of money available to build and maintain roads decreases. States are thus experimenting with an extra vehicle registration fee for EVs. As the nationwide average of federal and state gasoline taxes is about 50 cents/gallon, and each car on average consumes about 650 gallons a year, that's an extra $325/yr that EV owners will have to pay to register their car.

Also, forcing people to pay for every gram of CO2 they emit is a tax on breathing.

Re:Time for fair play.

[LynnwoodRooster]

What are the subsidies given to the oil companies? Please list them, and explain how they are exclusive to just the oil companies and not all corporations.

Re:Time for fair play.

[swillden]

So as the percentage of EVs on the road increases, the amount of money available to build and maintain roads decreases. States are thus experimenting with an extra vehicle registration fee for EVs.

States should really take the opportunity to rationalize the road construction and maintenance cost allocation. According to the US GAO, road damage is proportional to the fourth power of per-axle weight, times the number of axles. They estimate that an 18-wheeler does 9,600 times as much damage as a passenger sedan, and that's on a per-mile basis. When you also factor in that many trucks cover 100K miles per year, vs, say, 15K for a car, that means the trucker's share is 64,000 times that of the car owner.

This approach should be applied uniformly: every vehicle, large and small, should be assessed an annual tax based on miles driven and a * (w/a)^4, where a is the number of axles and w is the vehicle weight. That's not quite accurate because weight isn't distributed evently, but it's close enough. EVs would end up paying more than their ICEV counterparts, because they tend to be heavier.

Oh, of course, with this system, all gasoline and diesel taxes that fund road maintenance should be dropped, and replaced with pollution taxes which attempt to compensate for the environmental damage caused by burning fossil fuels. CO2, particulates, NOx, etc.

Also, forcing people to pay for every gram of CO2 they emit is a tax on breathing.

Nonsense. Unless they're eating fossil fuels, people are carbon neutral. Every gram of CO2 they emit is a gram of CO2 that was absorbed by the plants they ate (or the plants that were eaten by the animals they ate, etc.). The problem isn't CO2 emissions, the problem is the emission of CO2 that was dug out of the ground where it had been safely locked away.

Re:Time for fair play.

[Gravis Zero]

you work out how much that is (the full price of the product) for all the things you buy, tally that up and let us know how much it is, then you donate that to an environmental organization.

Sadly, the environmental cost of many products is hidden from the buyers. It would require government regulation to ensure the proper pricing is applied. However, your point that it would cost more and you snidely do not wish to pay for it is exactly the point. This new market force will result in an entirely new line of products that are far more environmentally friendly and therefore less expensive than existing products. The key is not to dump high prices on everyone all at once but rather slowly raise them an allow companies to adapt.

The free market isn't perfect but cost optimization is something it does very well.

Shoulda stayed on that advisory board, Elon

[melted]

Shoulda stayed on that advisory board, Elon. As a taxpayer though, I think it's great I no longer have to subsidize cars for the rich. Phase all of this shit out tomorrow, I don't care.

Re:Shoulda stayed on that advisory board, Elon

[melted]

They repeatedly vote for the idiots who think it's prudent for the US to wage 7 wars at the same time and be the world police, so I have no sympathy for them either. The bill will come down some once Trump unwinds the war engagements, denuclearizes NK, and makes our NATO "allies" pay 2% of their GDP like they're supposed to.

RTFS

[SuperKendall]

what is this "$35K Model 3" you speak off

The tax credit phase-out comes just as Tesla was preparing to sell a $35,000 version of its Model 3 sedan

Re:RTFS

[superdave80]

They've been 'preparing' to sell a $35k car for years now. Wake me when they actually roll one off the assembly line.

Re:How does it feel

[Sique]

There are people who pay more for a house, that also can't do what an ICE can do.

Make a new company...

[ClarkMills]

Make a new company, sell the IP & plant to the new company for $1.

TeslA check
TeslB
TeslC ...

Profit :)