Musk Hints Tesla Could Try To Maximize Tax Credit-Eligible Model 3 Deliveries After Credit Expires

Tesla Motors may take a creative approach to address concerns Model 3 buyers have about the federal tax credit disappearing.

While the $7,500 federal tax credit on the Model 3 would potentially bring the $35,000 starting price down to an effective $27,500, it is on course to be phasing out by the time these electric cars show up for delivery starting as soon as late 2017.

This is because Tesla will likely be reaching the federal tax cap of 200,000 cars through its Model S and Model X deliveries by the time the Model 3 is ready to roll out.

Tesla owners have been concerned enough about the disappearing incentive to question Tesla CEO Elon Musk on his Twitter page – and to suggest a solution.

A few Tesla customers and analysts have noticed a bit of a loophole in the IRS rules for the credit, The $7,500 credit isn’t cut until the end of the quarter after the one in which a company hits its limit of 200,000 cars delivered in the U.S. Tesla could extend that time period by reaching the limit on the first day of a quarter then deliver Model 3s over the next six months before the credit begins to disappear.

SEE ALSO: Tesla To Partially Show Model 3 Next Month – Federal Tax Credits For It Could Be Quite Limited

Tesla may be willing to support this solution, Musk tweeted.

“We always try to maximize customer happiness even if that means a revenue shortfall in a quarter,” Musk replied to comments in an April 3 post on Twitter.

When asked whether he thinks Model S and Model X tax incentives will exhaust the remaining credits, Musk posted a vague response. “Our production ramp plan should enable large numbers of [new customers] to receive the credit,” Musk wrote.

Analysts are watching to see whether the federal tax credit will raise the bar on the automaker that has struggled in the past to deliver products on time.

The federal tax policy has been structured so that once an automaker sells 200,000 qualifying electric vehicles in the U.S. market, a phase-out begins. Once that 200,000 unit sale mark is reached, the IRS cuts the tax credit in half for the next two quarters to a maximum of $3,750. Then the IRS slashes the tax credit in half again for another two quarters – after which the credit goes away. Auto industry analysts expect Tesla to cross the 200,000 threshold as soon as 2018, once deliveries of the Model 3 begin.

Automotive News