This article has been updated to reflect current sales data.
In Tesla’s first quarter 2018 SEC 10-Q 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 of the end of May 2018?
The table below shows the total history of Tesla sales in the U.S. through the end of May 2018:
The source of these sales numbers are from InsideEV with the exception of the number of Roadsters sold in the U.S.
According to IRS regulations, "The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009).” I estimate that Tesla sold about 815 Roadsters in the US after December 31, 2009. (Please refer to the footnote below for a derivation of that estimate.)
In reviewing the above chart, Tesla is only about 6,200 EVs away from hitting the 200,000 tax credit phase out trigger. Even if Tesla were to freeze its U.S. production rate at the May level of about 9,220 total EVs per month, they would still hit the phase out trigger at about the third week in June unless Tesla were to shift a significant number of deliveries to Canada. If they do not shift enough deliveries and the phase out trigger is hit in June, then tax credits would be reduced by half starting in October, 2018.
Will Tesla shift deliveries to Canada to prolong the US tax credit?
Although Tesla has not responded to recent inquiries on this subject, 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:
Now, according to the article linked below from Electrek, that is precisely what Tesla is doing.
Tesla sent out a massive Model 3 shipment to Canada as some US deliveries get delayed
From the article:
"Tesla is evidently starting Model 3 deliveries in Canada in a massive way with large shipments being spotted throughout the country including one with an estimated 1,000 Model 3 vehicles in Toronto.
The massive volume in Canada is coming as Tesla delayed some Model 3 deliveries in the US.
In March, Tesla sent a huge first batch of invites to Canadian reservation holders."
If Tesla can temporarily redirect a few thousand Model 3 deliveries to Canada during June and delay hitting the phase out trigger until July, the beginning of a quarter, then the full tax credit could be extended by another three months.
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 is still ramping up production and therefore will be producing Model 3s at a much higher rate in the third quarter than in the second quarter.
How Fast Will Tesla be Producing Model 3s?
Bloomberg has a tracking system that estimates Model 3 U.S. sales. During May Bloomberg estimated that Tesla momentarily hit a weekly production rate at over 3500. However, as of May 31, 2018 they estimate that Tesla was producing at about 1,400 per week. From the InsideEV's May sales estimates, we can see that Tesla averaged at over 1,500 per week.
Elon has plans for much higher production levels. In an internal memo to employees sent in mid-April, Elon stated that he expected weekly production rates in May to be between 3000 to 4000 per week, and between 5000 to 6000 per week in June. This hopefully will be achieved by a comprehensive set of production line upgrades and shifting to 24/7 operations.
Whereas, it can be seen that Tesla momentarily hit their target rate for a week in May, that rate was not be sustained for the entire month.
My Best Guess
Whereas the estimated May Model 3 sales rate broke all Tesla records, it was nevertheless lower than Elon had hoped for. However, this temporary delay in the production ramp-up does have a silver lining in that it will assist in delaying hitting the phase out trigger. This coupled with the fact that Tesla has begun to significantly shift deliveries to Canada increases the chances of hitting the trigger in July at the beginning of a quarter. At that time, I have confidence that Tesla will be delivering at a total combined US and Canadian rate close to the planned rate of over 5000 Model 3s per week and that the full $7,500 tax credit will be available until the end of 2018.
President, Florida Tesla Enthusiasts
Footnote: Derivation of Roadster estimate:
Based on information provided on the Tesla Motors Club forum, a total of approximately 1464 Roadsters were sold in North America since the beginning of production in 2008 until the end of 2011. Likewise, an additional 780 Roadsters were sold in Europe and Asia during this period. So ignoring Canadian sales as de minimis, about 65% of total global sales were in the U.S. According to Tesla's 2012 SEC 10-K report, production of the Roadster ended in January 2012 and was no longer available for sale the in the U.S. after December 2011. In addition, according to a Tesla press release, in January 2010 Tesla displayed it's 1000th Roadster at the North American International Auto Show. We can estimate of that of that total of 1000 Roadsters, about 650 were sold in the USA before December 31, 2009. Therefore, we can subtract the 650 from the total Roadsters delivered in the U.S. between 2008 and 2011 (1464) to arrive at about 815 Roadsters delivered in the U.S. after December 31, 2009.