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

In 2013 Tesla’s Model 3 – then “Model E” – was tentatively projected to be revealed January 2015 in Detroit, last May CEO Elon Musk tweeted it would be shown March 2016, and indeed it will be he said again last week – for the most part.

“The first pictures of the Model 3 will be end of March” Musk said from Chambourcy, France. “I am being a little coy here, we are not gonna show everything about the Model 3 until a lot closer to production time.”

Unclear is what not “everything” is. What may be revealed are glimpses or images of a pre-production prototype. It also may be possible that Tesla will reveal tidbits in its Q4 2015 shareholder letter due Feb. 10, but all this remains to be seen

“Production time” is penciled in for “mid 2017” at which time the company may have only half a year to one full year left to sell the $35,000-and-up EV with full $7,500 federal tax credit barring a revision of the 200,000 per-manufacturer unit cap.

If nothing changes in federal law, Tesla could sell as few as 20,000 and as many as 40,000 Model 3s with full tax credit, so add this to the open questions we’ll have more on further along in this story.

Meanwhile, reports have gone out that the Model 3 could be a multi-model platform for body styles ranging from a coupe, crossover, station wagon, pickup truck – and of course a sedan as more commonly reported and expected.

Most likely what will be shown next month will be a sedan 20-percent smaller than a Model S, and targeted at European vehicles like the BMW 3-Series, Audi A4, Mercedes C-Class, and Jaguar XE.

BOLT MSRP

Critics can say what they will about GM, but the LG Chem-GM connection that built the Chevy Bolt indicates it is not a compliance in any sense of the word.

These cars are already a notch above the frequently compared 2017 Chevy Bolt – GM’s 200-plus mile compact crossover/hatch for $37,500 due for production end of this year.

And if that’s not enough, further speculation by Auto Express is that though the Model 3 might not get the Model S’ 90-kilowatt-hour battery, it should still run 0-62 sprints rivaling a BMW M3’s 4.1 second time.

SEE ALSO: ‘Not a compliance car,’ GM says 2017 Chevy Bolt can meet demand of over 50,000 per year

Also, range it said, could be as far too.

“The chances are it will be able to go almost as far on a full charge as a [BMW] M3 could on a full tank of fuel – the M3 has a theoretical range of 423 miles,” said Auto Express in the UK.
 


Even if Auto Express meant 423 kilometers (262 miles), Elon Musk has never said this however, but the minimum level for Tesla’s M3 (Model 3) is a bona fide 200 miles. Further, no one will be surprised if the Model 3’s range is a good bit more, as both Chevrolet and the next-gen Nissan Leaf have touted 200-plus numbers, if unofficially.

Volume Car

Tesla has said with the aid of its gigafactory pumping out batteries and driving down their costs, its Model 3 will lead the charge toward explosive growth.

Last year, its best ever, Tesla sold just around 51,000 units. By 2020 it has said its production volume could be 10-times this, or 500,000 units.

SEE ALSO: Nissan Testing 250-Plus-Mile Range Leaf Mule With New Battery

Musk has been reported as saying this level of volume would be required for Tesla to be profitable.

“Mr. Musk has said that the company wouldn’t be profitable unless its sells 500,000 vehicles annually by 2020,” reported Business Finance News last September. “500,000 vehicle deliveries is the 2020 goal that is purely dependent on Tesla’s much affordable, compact EV, the Model 3, which is slated for 2017-end and reliant on the under-construction battery producing factory.”

Critical pundits meanwhile have said this unprecedented growth with so many uncertainties including cheap gas hanging in the air is highly unrealistic.

This is the goal, however.

Tax Credits

The Model 3 is surely shooting for the stars as it aims to be superior to the Bolt in style and performance and other ways presumed as well – while undercutting Bolt’s $37,500 price by $2,500 at entry level.

To make this a volume selling car, a $7,500 federal tax credit will be assumed making for a theoretical $27,500 net – excluding higher trim levels thought by observers as sure to come, and not counting fuzzy Tesla math factoring gas savings, or other opportunity costs saved.

But Tesla is facing another deadline, one of the federal sort.

By June 2017 – the tentative time frame for first deliveries – Tesla may have in hand 60,000 or so federal tax credits to split between Model 3 and Model X and Model S.

Through December 2015 Tesla had sold about 64,000 credit-eligible cars. In its Q3 2015 shareholder’s report, Tesla forecasted weekly 2016 production translating to 83,000-93,600 units globally for this year, and historically the U.S. has spoken for 60 percent of its worldwide production.

TESLA X

Model X and Model S sales will continue to use up a 200,000 limit for federal tax credits per manufacturer.

If that U.S. percentage carries forward, this would equal 49,800-56,160 U.S. sales for 2016, but analyst Alan Baum conservatively estimates 2016 will see 45,900 U.S. deliveries bringing the total to around 110,000 by end of this year. For 2017 Baum estimates 51,300 U.S. sales including 5,300 Model 3 sales tentatively. Half a year at this rate is another 26,000 sales added to 110,000 or 136,000 tax credits and this could easily rise to over 140,000 sales, even 150,000 assuming Tesla’s numbers plus past precedent.

Assuming just 140,000 sales by June 2017, and that the Model 3 is delivered then, Tesla may have room for 20,000-40,000 sales depending on sales of the Model S and X before the tax credits reach the 200,000 credit cap and begin to fade away. If the Model 3 is delayed as have been past Teslas, it may have fewer credit-eligible cars to sell, or worse case, the company may be completely out.

Under federal law for the following two quarters after the 200,000 mark is hit, the tax credit is halved to $3,750, then again for two quarters for $1,875, then it is ceases.

A $7,500 federal credit is more than 20-percent reduction in net price and will be more important at this price point.

Environmental activists for the Natural Resources Defense Council (NRDC) in Washington we’ve spoken to have hinted they will be looking for an increase on the cap, but it may be early to see action to make this congressional approval happen.

Otherwise Excitement

Tesla may begin taking preorders for the Model 3 after it shows whatever it does in less than 60 days from now.

It’s believed a crossover may in time follow the sedan, and people are otherwise eagerly awaiting the possibility of owning a Tesla with a lot of trickle-down tech from Model S.

“We want people to fall in love with their car and look forward to driving it,” said Musk to Auto Express.

This image by Auto Express is a photoshopped shrunken Model S but Tesla’s designer explicitly says not to expect Model 3 to look like a smaller Model S.

This image by Auto Express is a photoshopped shrunken Model S but Tesla’s designer explicitly says not to expect Model 3 to look like a smaller Model S.

Costs are expected to be saved with more steel usage in place of aluminum and the platform will reportedly be bespoke, not shared with Model S and X.

This will be a very cool car, an original all-Tesla design if past statements by Tesla are correct.

Auto Express further reports its full reveal may be in Europe but whereever it is, high-stakes Tesla is will really be pressing the envelope, but then that was the plan all along.

A video from France is the basis for the partial reveal news, and that’s given at 12:28 onward: