Tesla customers to lose key tax credit next month
First Trust Advisors Chief Economist Brian Wesbury and Barron's Senior Editor Jack Hough on Tesla's plans to reimburse customers for missed tax credits and the company's decision to cut the price of its Model 3 in China.
Tesla customers will lose out on a key federal tax credit on vehicles delivered after Monday.
As of Tuesday, the federal tax credit for anyone who purchases a new Model S, X or 3 will be reduced to $3,750 from $7,500. The full credit is only available while a manufacturer maintains sales below 200,000— a threshold Tesla surpassed over the summer.
Tesla CEO Elon Musk has taken to Twitter throughout recent days to encourage customers to purchase a vehicle before the phase out begins.
As of July 1, the credit will be reduced even further to $1,875. As of 2020, the incentive will be entirely phased out.
There are concerns the reduction of the tax credit could impact some buyers’ ability to afford the vehicles.
The Model 3 was intended as a way to bring the luxury electric vehicle to the average consumer. Musk promised to deliver a $35,000 version of the car, but the entrepreneur acknowledged that isn’t possible for Tesla just yet. In October, Musk announced a $45,000 Model 3.
Musk said on Twitter in May that if the company had shipped the $35,000 version right away, Tesla would “lose money [and] die.”
During the first three quarters of the year, Tesla delivered more than 150,000 vehicles. An uptick in Model 3 production in the third quarter drove the company to profitability for the first time since 2016.