2018 Tesla Model 3
It's been a topic of discussion for years: What will happen when a carmaker reaches the cap on U.S. sales of electric cars that qualify for the full federal tax credit of $7,500?
That number is 200,000; after the rest of that calendar quarter and the one following, the credit is halved for a further two quarters.
Rough calculations indicate that Tesla is likely to reach that total first, followed by General Motors and Nissan in that order.
Now, Tesla had made it official: It expects to sell its 200,000th qualifying electric car in the U.S. sometime this year.
It filed its required Form 10-K for the financial quarter ended December 31, 2017, with the Securities and Exchange Commission, which posted it online Friday.
In that document, Tesla specifically said: "We currently expect such 200,000th qualifying delivery to occur at some point during 2018."
2018 Tesla Model S
For years, Tesla has refused to break out its quarterly deliveries by region or country, so it's impossible to know exactly how many cars it has sold in the U.S.
Records published online by the Internal Revenue Service on the numbers of electric-car tax credits claimed are incomplete, outdated, and often mystifying.
By many estimates, Tesla had sold 160,000 to 165,000 cars in the U.S. between 2008 and the end of last year.
The big unknown for Tesla, of course, is how many of its lower-priced Model 3 sedans it can deliver this year, and how quickly it can ramp up production of that car to thousands each week.
After delays, the latest promises from the company are that it will be producing 2,500 Model 3s a week by March 31 and 5,000 a week by June 30.
So how would this play out?
2018 Tesla Model X
Let's assume Tesla is clever, and manages to sell its 200,000th qualifying electric car in the U.S. on July 1 (the first day of, say, the third quarter).
If that were the case, the $7,500 tax credit would remain in place through December 31 (the balance of the quarter in which the limit is reached, and the following quarter as well).
Then, in the first two quarters of 2019, the tax credit amount would fall to 50 percent of its original value: $3,750 for any car Tesla makes.
In the following two quarters—July 1 through December 31 of 2019—the credit would drop again, this time to just 25 percent of the original amount, or $1,875.
Then it would be done: Tesla buyers in the U.S. would get no federal tax credit starting January 1, 2020.
Perhaps that exercise makes it clearer why Tesla needs to get its Model 3 production up to speed as quickly as possible.
2017 Tesla Model 3 and Model S in Tesla assembly plant parking lot, Fremont, CA, November 2017
While the only Model 3 versions available today are the Long Range model with a 310-mile range rating, starting at $44,000.
But the company is expected to put its base Model 3, priced at $35,000 with a 220-mile range, into production sometime this year—the one closest to what mass-market buyers can actually afford.
Those are the cars and buyers to whom the price cut represented by a $7,500 tax credit would likely matter most.
They are likely crossing their fingers that the company can crank out very high volumes of base Model 3s in the three- to six-month window following the delivery of that 200,000th Tesla in the U.S.