I wonder how Tesla 3 Buyers will react to losing tax credit

[lencap]

Like many I considered the Tesla and wish them well. Any EV is welcome as far as I'm concerned.

I'm also impressed with the early deposits for the new model 3. What hasn't been discussed much is the Federal Tax credit situation. Tesla, like everyone else, will lose the $7500 tax credit after 200,000 cars are delivered. It will fall to $3,750 and then $1875 before finally ending.

So the 300,000+ potential owners for the new model 3 may be surprised that their car has no rebate attached. There is also the very real possibility that few will actually order the "stripper" $35,000 car. Going by the option prices for the S, the base price is likely to be far above $35,000, especially for early buyers.

So if the car costs closer to $42,000, and the rebate is reduced or eliminated, and you have to wait 2+ years to get the car, how many of those deposits will actually turn into sales? Likely somewhat less than expected.

I wish them well, but it's going to be a challenge to expand production to meet demand, fund a continuing build out of their charging stations, fund/build a major battery plant and keep things moving forward.

Compared to the Tesla challenges it seems to me that BMW has made the right call with their i line of cars - start small, build out your experience, see where the market's heading, and then make your future plans.

Anyway, at this point what's good for Tesla is good for all EVs - more awareness, more interest.

 

[didja]

Like many I considered the Tesla and wish them well. Any EV is welcome as far as I'm concerned.

I'm also impressed with the early deposits for the new model 3. What hasn't been discussed much is the Federal Tax credit situation. Tesla, like everyone else, will lose the $7500 tax credit after 200,000 cars are delivered. It will fall to $3,750 and then $1875 before finally ending.

So the 300,000+ potential owners for the new model 3 may be surprised that their car has no rebate attached. There is also the very real possibility that few will actually order the "stripper" $35,000 car. Going by the option prices for the S, the base price is likely to be far above $35,000, especially for early buyers.

So if the car costs closer to $42,000, and the rebate is reduced or eliminated, and you have to wait 2+ years to get the car, how many of those deposits will actually turn into sales? Likely somewhat less than expected.

I wish them well, but it's going to be a challenge to expand production to meet demand, fund a continuing build out of their charging stations, fund/build a major battery plant and keep things moving forward.

Compared to the Tesla challenges it seems to me that BMW has made the right call with their i line of cars - start small, build out your experience, see where the market's heading, and then make your future plans.

Anyway, at this point what's good for Tesla is good for all EVs - more awareness, more interest.

There has been a lot written about this but if he delivers his 200k us model on the first day of a quarter he can probably deliver many more in that first free quarter and then maybe drop the price a little to come closer to the 3875 lost and by then hope the momentum and car performance keeps interest up. This is why I reserved before it was announced and I'll need to reconsider if I won't get the credit. I'll keep my i3 either way though.

 

[johnnylingo]

The media is starting to pick up on this. Just heard about it listening to my daily podcast (17 minutes in)

https://twit.tv/shows/tech-news-today/episodes/1489?autostart=false

Personally, I think a certain percentage of Model 3 pre-orders are going to back out regardless. They'll get impatient some time in 2017 and select an alternative. But yes, the dwindling rebates will speed that process along and I think it's great news for BMW, Chevy, Kia and anyone else able to offer 120+ mile ranges on their 2017 models. The biggest losers will be VW and Ford - a day late and buck short.

However, it's also important to consider how we've got an election coming up, and assuming Hillary wins, we'll likely see some type of new wave of rebates to keep certain wings of the Democratic party in her corner. A few hundred million is chump change to the Federal government, especially when it's benefiting a US company, US workers, and to a lesser extent foreign governments (Germany and S. Korea) that have strong trade relationships.

Of course, nothing's a given with the Tea baggers around.

 

[imolazhp]

Tesla will lobby the US government to give them more, it is unfair that Toyota claims they will never make a full BEV so they'll never use their tax credit, yet a BEV only company will run out much sooner.

 

[alohart]

But yes, the dwindling rebates will speed that process along and I think it's great news for BMW, Chevy, Kia and anyone else able to offer 120+ mile ranges on their 2017 models. The biggest losers will be VW and Ford - a day late and buck short.

The e-Golf will be joining the 120+ mile range club at the end of 2016. Unfortunately, the i3 BEV seems to have fallen a bit short at an estimated 114 miles, but maybe the E.P.A. will rate it a bit higher. Ford, what's up for your EV future?

 

[johnnylingo]

The e-Golf will be joining the 120+ mile range club[/url] at the end of 2016..Ford, what's up for your EV future?

The reporting on that has been slightly off. It's now confirmed the 120 range won't be until the 2018 e-Golf models, which will be out mid-2017. They're then saying 200 mile range for the 2020 models but given that's 3 years out I wouldn't hold them to it.

For the Focus Electric, it looks like Ford will be skipping the 2017 models and releasing a 100 mile or so range for the 2018 model. But their dates are even more vague than Volkswagen's.

 

[eneka]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

 

[gt1]

Most people lease, so they get the full credit regardless of their tax situation.

 

[Jonathan]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

I am sorry but no, I don't understand why people have that thought process of people that make a decent living. My wife and I pay at least that in taxes. You know how people who have money keep their money? They don't waste it. I will take any tax break possible.

I fully believe that a very large percentage, 40%+, that pre ordered the tesla, will not get one. Once that credit is gone it will make a huge difference. My i3 lease is up end of October 2017. I have to decide then what I want to do. We will see what the tesla model 3 situation is, but if it is nowhere near ready then I will be cancelling my pre order.

 

[Schnort]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

Owing $7500 in taxes is a pretty low bar, or at least low enough that $7500 still a sizable percentage of your income.

 

[gt1]

I fully believe that a very large percentage, 40%+, that pre ordered the tesla, will not get one.

This is an optimistic prediction. I believe the cancellations will be massive. Why get an expensive Corolla size car when the gas is cheap?

 

[johnnylingo]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

I disagree completely. A single filer with a taxable income of $50k will pay about $8k in Fed taxes for 2016.

Try living in Bay Area, LA, Seattle, Washington DC, or Chicago on that salary and tell you're "not worried" about a $7500 check? It's kind of a big deal.

 

[jadnashuanh]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

I disagree completely. A single filer with a taxable income of $50k will pay about $8k in Fed taxes for 2016.

Try living in Bay Area, LA, Seattle, Washington DC, or Chicago on that salary and tell you're "not worried" about a $7500 check? It's kind of a big deal.

And, they'll be subject to the alternate minimum tax rules, and not get the full $7500 back, either! Assuming Tesla hasn't used up all of it's allotments by the time they get their car. Rude awakening, to be sure.

 

[gt1]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

I disagree completely. A single filer with a taxable income of $50k will pay about $8k in Fed taxes for 2016.

Try living in Bay Area, LA, Seattle, Washington DC, or Chicago on that salary and tell you're "not worried" about a $7500 check? It's kind of a big deal.

This is a worst scenario. Someone with a family, mortgage and RE taxes may earn six figures and still owe less than $7500 to the feds. Still, $7500 is a good chunk of money for such family.
Everyone who doesn't care about $7500 has bought a model S or model X.

 

[eneka]

I dont think they'll care that much. To get the full $7500, you have to be paying $7500+ in taxes already. If you're paying that much in taxes, you should be well off enough to not worry about it.

I disagree completely. A single filer with a taxable income of $50k will pay about $8k in Fed taxes for 2016.

Try living in Bay Area, LA, Seattle, Washington DC, or Chicago on that salary and tell you're "not worried" about a $7500 check? It's kind of a big deal.

I'm no financial adviser but I can't image spending 60% of my income on a car! Ii should probably rephrase my post, but if you're making 50k/yr living in the bay area, you certainly won't be buying a tesla! If they're depending on the $7500, then it's a gamble if they don't have an early reservation, at least the money tapers off instead of just disappearing!

 

[DHuff]

This is an optimistic prediction. I believe the cancellations will be massive. Why get an expensive Corolla size car when the gas is cheap?

I don't think that current gas prices are going to play that large of a factor in the Tesla purchases... or even with many electric car buyers.

People are starting to wise up. The whole "but it is cheap right now" argument. This is no longer enough for people because they know gas prices are just going to shoot back up again.

In my area, I am watching it rise every single day. And when it drops the price never drops as low as the last lowest time.

People aren't that dumb. They aren't going to keep getting fooled.

Plus, for most people that I know who own Tesla's, it is more about owning a Tesla, then it is anything else. They want to be a part of what Musk is doing. They want to be on the cutting edge. They want an American car, but they want it to be good. And they want something a little more exclusive.

Even the more expensive price I don't think is going to get most of the people that preordered to back out. I mean people bought the S and the X, and even all the Roasters. There are enough people with money. And more than enough people who want to spend that money on a Tesla.

I was in a Tesla store just the other day, and there was a guy sitting there with a sales rep, desperately trying to figure out how to get a loan so that he could have enough just to lease an S.

The buying decision of these cars is not going to rely on rationality as much as it is the desire for perceived status.

 

[hightower82]

Another thing that hasn't been mentioned yet is the fate of the federal tax credit under the Trump administration. Assuming they don't fail miserably at tax reform like they just did with the healthcare bill, they may very well get rid of the whole EV tax credit program altogether before the 200k mark is even reached and likely long before Tesla comes anywhere near catching up with their reservations.

I can't deny that a big part of my decision to buy a 2017 BEV was based on the high likelihood that this tax credit is not going to be around for much longer (either because of Tesla's likely success or because of Trump).

What I'm really curious about though, is what will the lack of tax incentives do to the MSRP of EVs? Are they being marked up now because of the tax credit? Will Tesla or BMW actually lower their prices once the tax program goes away? And if they don't will people still buy these cars?

 

[spinball]

Why get an expensive Corolla size car when the gas is cheap?

In other words, why buy an iPhone when you can get a flip phone? How'd that turn out? :mrgreen:

 

[gt1]

Don't stop there, compare with a pair of jars connected with a string.

 

[dirtboy]

There's a difference between a tax credit and a tax deduction. Even those who don't pay any Federal income taxes can still get the full amount of the credit back as a refund.