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Tesla Model 3 Owners May Get Screwed Out Of Their EV Tax Credit

Government / 18 Comments

The hits just keep coming for people who are patiently waiting for the Model 3.

Tesla's affordable car, the Model 3, is finally here and everyone keeps asking us whether they should put a deposit down on one. The Model 3 does seem like a very good car with many benefits, but there are a lot of downsides that people don't seem to be aware of. For starters, Tesla has been losing preorders because no one who has put their name down has any idea when their car will actually be ready. Car And Driver now reports that there may be another downside to the Model 3: buyers won't get the full government EV tax credit.

The Model 3 seemed like it would be a great buy starting at $35,000. Add in the $7,500 tax credit that is available in the US, and this car was going to be very affordable. Unfortunately, that tax credit has a phase-out that is triggered if a manufacturer reaches 200,000 cumulative sales (starting in 2010) of qualifying cars. Alan Baum of Baum & Associates, which forecasts and tracks sales of hybrids, plug-in hybrids, and electric and fuel-cell vehicles, predicts that Tesla will reach the 200,000 car mark in the first quarter of 2018. Tesla entered 2017 with 111,953 deliveries, and should end the year with around 150,000.

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After Tesla reaches 200,000 deliveries, buyers can only get 50 percent of the credit for two quarters, and then 25 percent for vehicles delivered for two quarters after that. If you are lucky enough to get your car by September, you could still get the full $7,500. This tax credit will then drop to $3,750 for 2018. Tesla is the only automaker that is nearing the 200,000 unit phase-out. Nissan has only sold 112,128 units of the Leaf and GM has sold 145,820 qualifying plug-ins to date. Sorry to all those people who dream of owning a Tesla, the Model 3 may not be as "affordable" as we'd hoped.

If you really want to get a Model 3 while the tax incentive is still high, we suggest you order the more expensive model with the larger battery and extended range. Those will be the cars that Tesla delivers first. Anyone who wants the bare-bones $35,000 Model 3 will likely be waiting a long time for their car and will miss out on the $7,500 incentive.