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Tesla promises all cars ordered by October 15th will qualify for $7,500 tax break

Tesla promises all cars ordered by October 15th will qualify for $7,500 tax break


The tax credit phase out has begun

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Illustration depicting multiple red Tesla sedans on a black background.
Illustration by Alex Castro / The Verge

Tesla says all orders placed before October 15th will be delivered before the end of the year and qualify for the full $7,500 federal tax credit. But given the electric automaker’s well-publicized delivery problems, prospective car buyers may want to take that promise with a grain of salt.

Customers ordering after the end of the year won’t qualify for the full tax credit because Tesla crossed the 200,000 electric vehicle sales mark in July. Customers who take delivery of their cars between January 1st and June 30th, 2019, will only be eligible for a $3,750 credit. And customers who take delivery between July 1st and December 31st, 2019, will be offered $1,875. After that, the incentive is dead.

This could put Tesla at a disadvantage

This could put Tesla at a disadvantage, especially as its larger, and more efficient rivals like Mercedes-Benz, Audi, and Jaguar begin ramping up their own EV production. Those vehicles will hit dealerships starting in 2019 with the full EV tax credit as a lure. It could also mean a frantic push for Tesla in the fourth quarter of 2018 to keep production and demand in line.

The loss of the tax credit is likely to be a big disappointment for anyone hoping to get a discount on the promised $35,000 base version of the Model 3. Tesla won’t begin producing the cheapest version of its most affordable car until mid-2019.

Put in place early on in the Obama administration, the tax credit was seen as a tool that could be used to encourage customers to buy plug-in electric or hybrid vehicles. And while many didn’t expect the credit to survive in a Republican-controlled government, it managed to slip its way into the tax bill that was signed by President Trump in December.

But for how long it will last is anyone’s guess: Sen. John Barrasso (R-WY) introduced a bill this week to kill the tax credit and instead raise taxes on electric vehicles. Another bill would remove the delivery limit for the tax credit and replace it with a time limit.

As Congress debates the future of tax incentives for EVs, some states are stepping up their own efforts. California is considering an increase to its current state tax subsidy for EVs, from $2,500 to $4,500, reports Bloomberg. Other states are also weighing credits of their own.

From “production hell to delivery logistics hell”

Meanwhile, Tesla is under extraordinary pressure to build and deliver as many cars as it can. “We’ve gone from production hell to delivery logistics hell,” Musk tweeted as he apologized to a woman who said her new Tesla had been delayed yet again. Some cars have piled up in parking lots around the country, and customers have been waiting for hours in long lines for their new vehicles. Tesla put out a call for volunteers to help get owners into their new cars at retail stores. Musk even toyed with the idea of building his own car carriers to expedite deliveries.

Tesla made 53,239 Model 3s in the third quarter of 2018, which is nearly twice as many as it produced in the previous quarter. The automaker delivered 55,840 Model 3s and 83,500 cars in total (including the Models X and S). That means Tesla sold, in one quarter, “more than 80 percent” as many cars as it did in all of 2017.

According to Bloomberg’s tracker, Tesla recently crossed a major threshold when it made its 100,000th Model 3.

But Musk is known to break promises, especially when it comes to production and delivery numbers. That means customers will have to weigh his promises about deliveries before the end of the year against the company’s actual track record before pulling the trigger on a new Model 3.