Tesla Tax Incentives: How Much Longer will They Last?

Tesla has been experiencing a fall from grace recently, after losing their position as the most valuable U.S. car manufacturer. But the drop in Tesla’s stock price isn’t the only thing working against them at the moment. It looks like the automaker will soon run out of federal tax incentives – just after the Model 3 goes to market.

Tesla Incentives Running Out

Electric vehicles aren’t yet on a price parity with ICE vehicles, meaning the federal tax incentive of $7,500 is still important. But this rebate only applies to the first 200,000 electric vehicles that a manufacturer sells in the U.S.

Tesla has already sold over 100,000 EVs in the U.S, which mightn’t sound like much when you consider they sold their first EV in 2008. But Tesla is now ramping up production and could bypass the 200,000 unit limit soon.

The question is, once Tesla goes over the 200,000 unit limit, will their sales stagnate due to tax rebate ineligibility?

How Much Longer

The Model 3 was launched earlier this month, with a starting price of $35,000 – meaning owning a Tesla just became a lot cheaper. It’s estimated that there were over 400,000 pre-orders for the Model 3. To try and keep up with the demand, Tesla plans to produce 20,000 Model 3s per month by December.

Tesla Model 3

Some Model 3s will qualify for the federal tax rebate, but most won’t. So, unless you’re one of the first to receive the Model 3, it’s unlikely you’ll get the tax rebate.

Production levels will rise again next year, as Tesla expects to produce 500,000 units by the end of 2018. Meaning it should smash the 200,000 unit limit relatively soon. So, with this in mind, is buying a Model 3 still good value for money?

At the rate Tesla is increasing its production levels, it won’t be long before it runs out of federal tax incentives.

Texas and Taxes

Texas recently reauthorized a $2,500 tax rebate to all EVs bought in 2018 and 2019, well, all EVs except Teslas. Running alongside the federal tax incentive, it could potentially save EV owners in Texas up to $10,000. This rebate is only available when buying through franchised auto dealers, which is bad news for Tesla-loving Texans.

Not only are there no franchised Tesla dealers in Texas but, if you order a Tesla in Texas, you must pick it up out of state. This is thanks to the lobbyists for franchised auto dealers, who got online sales of Tesla cars at the Tesla galleries and stores banned.

All things considered, buying a Tesla in Texas is quite difficult, something other vehicle franchises in the state undoubtedly love.

Would you buy a new Tesla even without the tax incentives? Let us know in the comments section below.


By Robert Bacon
Updated: July 18, 2017