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When will Tesla deliver the 200,000th electric vehicle in the US triggering the phase out of the $7,500 tax credit? (Public)

May 12, 2018 9:14 PM | Anonymous member (Administrator)

Image result for model 3

In Tesla’s last SEC 10-k report they stated, “…under current regulations, a $7,500 federal tax credit available in the U.S. for the purchase of qualified electric vehicles with at least 17 kWh of battery capacity, such as our vehicles, will begin to phase out over time with respect to any vehicles delivered in the second calendar quarter following the quarter in which we deliver our 200,000th qualifying vehicle in the U.S. We currently expect such 200,000th qualifying delivery to occur at some point during 2018."

So the big question is, "In which quarter will Tesla reach that 200,000th qualifying vehicle in the US?"

Where do we stand as at the end of the First Quarter?

The table below shows the total history of Tesla sales in the U.S. through the end of March 2018:

 

Jan 2018

Feb 2018

Mar 2018

2017

2016

2015

2014

2013

2012

2008-2011

Grand Total

Model 3

   1,875

   2,485

     3,820

     1,722

          -  

          -  

          -  

          -  

        -  

        -  

      9,902

Model S

      800

   1,125

     3,375

   27,060

   28,896

   25,202

   16,689

   17,650

   2,650

        -  

  123,447

Model X

      700

      975

     2,825

   21,315

   18,223

       214

          -  

          -  

        -  

        -  

    44,252

Roadster

        -  

        -  

          -  

          -  

          -  

          -  

          -  

          -  

        -  

   1,464

      1,464

TOTAL

   3,375

   4,585

   10,020

   50,097

   47,119

   25,416

   16,689

   17,650

   2,650

   1,464

  179,065

The source of these sales numbers are from InsideEV with the exception of the number of Roadsters sold in the U.S. (We believe our estimate of 1464 Roadsters sold in the US is more accurate than the InsideEV estimate of 1900, but 500 cars one way or another is trivial.)

In reviewing the above chart, Tesla is only about 21,000 EVs away from hitting the 200,000 tax credit phase out trigger.  So, even if Tesla froze its US production rate at the March level of about 10,000 total EVs per month, it would only take a little more than two months to hit the limit. 

Since production rates are growing exponentially, this means that conservatively they will hit the limit in the second quarter of 2018 (around June) if they do not start to shift deliveries to Canada.  If they do not shift deliveries the tax credit would be reduced by half starting in October, 2018.

Will Tesla shift deliveries to Canada to prolong the US tax credit?

Back on April 3, 2016 Elon provided a tweet that hints at Tesla’s thinking on the subject of delaying hitting the 200,000 mark:


As of today we have not seen actual deliveries to Canada yet, but there is evidence that the shift will occur soon. I believe that Tesla will adjust their U.S. deliveries to deliberately delay triggering the 200,000 mark to the beginning of a quarter in order to maximize the number of Tesla owners qualifying for the full tax credit. 

Furthermore, there is no limit on the number of cars that would qualify for the full tax credit during the phase out period.  So shifting U.S. deliveries to achieve hitting the trigger at the beginning of a quarter would result in more people getting the credit since Tesla will be producing Model 3s at a much higher rate in the third quarter than the second quarter.

In support of my speculation, on March 21st it was reported that Tesla started to send invites for Canadian configurations. 

Tesla starts Model 3 launch in Canada, confirms starting price at $45,600 CAD

Then on March 28th Tesla sends out massive batch of Model 3 invites to Canadian reservation holders

From the Electrek article linked above:

"An interesting thing to follow will be the rate of Model 3 deliveries in the US as Canadian deliveries start.

Tesla could try to slow down US deliveries to push the point at which they reach the 200,000 US delivery threshold for the federal tax credit phase-out.

If they can delay the 200,000th delivery in the US to the start of a new quarter, U.S. buyers get 3 more months of the full $7,500 tax credit before it steps down to $3750.

CEO Elon Musk already said that the company will try to optimize the federal tax credit for reservation holders and based on our estimate, Tesla should reach the threshold during the second quarter.

It certainly works with the timing of the Model 3 launch in Canada."

Finaly, today (April 26, 2018):

Tesla opens Model 3 configurator to more reservation holders in Canada

From the article linked above:

"This week, Tesla sent a second important batch of configuration invites to Model 3 reservation holders in Canada as deliveries are about to start in the country and the situation with the federal tax credit in the US is still unknown."

"Tesla could potentially change its delivery strategy over the next months to focus more on Canadian deliveries and push U.S. deliveries to the next quarter in order to deliver its 200,000th car in the US in Q3 and extend the phase-out of the $7,500 federal tax credit for its customers."

The author of the article agrees with my earlier remark that Tesla would hit the 200,000th U.S. delivery mark in second quarter 2018 if deliveries are not optimized for the federal tax credit extension. 

This recent development regarding increased invitations to configure Canadian Model 3s and the news of imminent Canadian deliveries, suggests that Tesla is positioning itself to shift deliveries from the US to Canada to prolong the US tax credit.  If so, instead of hitting the limit in the second quarter it could be pushed out to third quarter.  Were that to happen, the reduction of the tax credit by half would occur in January, 2019 instead of October, 2018.

How Fast Will Tesla be Producing Model 3s?

Bloomberg has a tracking system  that estimates Model 3 U.S. sales. As of today (April 26, 2018) they estimate that Tesla was producing Model 3s at a rate of 2,556 per week. 

However, Elon has plans for much higher production levels even in the short-term.  In an internal memo to employees sent in mid-April, Elon stated that he expects weekly production rates in May to be between 3000 to 4000 per week, and between 5000 to 6000 per week in June. This will be achieved by a comprehensive set of production line upgrades and shifting to 24/7 operations.

Tesla Model 3 production aims for 6,000 units per week in June after upgrade in May – ~5,000 with margin of error, says Elon Musk

Update as of May 12, 2018:

  Jan 2018 Feb 2018 Mar 2018 Apr 2018 2017 2016 2015 2014 2013 2012 2008-2011 Grand Total
Model 3    1,875    2,485      3,820      3,875      1,722           -             -             -             -           -           -       13,777
Model S       800    1,125      3,375      1,250    27,060    28,896    25,202    16,689    17,650    2,650         -     124,697
Model X       700       975      2,825      1,025    21,315    18,223        214           -             -           -           -       45,277
Roadster         -           -             -             -             -             -             -             -             -           -      1,464       1,464
TOTAL    3,375    4,585    10,020      6,150    50,097    47,119    25,416    16,689    17,650    2,650    1,464   185,215

Tesla starts Model 3 deliveries in Canada

From the article linked above:

"The automaker could even change its delivery strategy over the coming months to focus more on Canadian deliveries and push U.S. deliveries to the next quarter in order to deliver its 200,000th car in the US in Q3 and extend the phase-out of the $7,500 federal tax credit for its customers.

It’s unlikely to happen in the next few weeks since Tesla just sent out another batch of invites in the U.S. last month.

Unfortunately, Tesla is not commenting on the situation. Electrek estimates that Tesla would hit the 200,000th U.S. delivery mark in Q2 if deliveries are not optimized for the federal tax credit extension.

We should have a better idea of the situation by the end of the month."

6 Automakers Closest To Losing The Federal Tax Credit – April 2018

From the article linked above:

Source: INSIDEEVs, Tesla number of 183,801 excludes Roadsters

"Taking into consideration the numbers and pace of sales in the past months, Tesla should hit 200,000 first, in the second quarter of this year (probably July/Q3 though).

But, if Tesla understands the value of that $7,500 credit, then it will likely limit deliveries in June, in order to hit 200,000 in July, thus making use of three months of the $7,500 amount, instead of just a few days."


My Best Estimate

I believe that instead of hitting the 200,000 EV trigger in June, that Tesla will shift deliveries to Canada and delay hitting the trigger until July.  At that time, I expect that Tesla will be delivering at a total combined US and Canadian rate of over 5000 Model 3s per week and that the full $7,500 tax credit will be available until the end of 2018.


Larry Chanin
President, Florida Tesla Enthusiasts


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