Tesla customers will start losing a $7,500 tax credit in 2019

Tesla CEO Elon Musk at a forum on startups in Hong Kong.

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Tesla CEO Elon Musk at a forum on startups in Hong Kong.
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Reuters/Bobby Yip

  • Tesla has sold 200,000 electric vehicles in the US, Electrek first reported, which means its customers will start to lose access to a $7,500 tax credit.
  • Tesla confirmed to Business Insider that it had passed the 200,000-vehicle threshold.
  • The credit will begin to phase out for Tesla customers in January and will no longer be available in January 2020.

Tesla has sold 200,000 electric vehicles in the US, Electrek first reported Thursday, which means its customers will start to lose access to a $7,500 tax credit.

Tesla confirmed to Business Insider that it had passed the 200,000-vehicle threshold.

The federal government gives people who buy electric vehicles a tax credit of $2,500 to $7,500, depending on the vehicle’s size and battery capacity. As Tesla wrote in an annual report filed with the US Securities and Exchange Committee in February, its customers get the full $7,500. But two calendar quarters after a company sells its 200,000th electric vehicle in the US, the tax credit begins to phase out.

For the first six months of the phaseout, customers are eligible for 50% of the credit. That falls to 25% during the six months after that. After the full year, the company’s customers are no longer eligible for that tax credit.

That means Tesla customers will be able to receive the full credit until January, when they will be eligible for half of the credit for six months. Starting next July, they will be able to get one-fourth the credit. The credit will expire for Tesla customers in January 2020.

Tesla is the first automaker to begin the credit phaseout, which is sure to affect at least some customers who have preordered the company’s Model 3 sedan. As of July 2, the company said it had about 420,000 preorders for the vehicle that had not been fulfilled, and customers are not entitled to the tax credit until their vehicle is delivered.

The Model 3, which starts at $35,000, was designed to broaden Tesla’s customer base beyond the luxury segment and accelerate the pace of electric-vehicle adoption. The company made 41,029 Model 3s from the vehicle’s July 2017 launch to the end of last month.

At the end of June, Tesla allowed those with Model 3 reservations to configure and order their vehicles, though the $35,000 base model is not yet available. A Tesla representative told Business Insider it would be available in six to nine months for those who had already made reservations. That’s longer than a timeline given by CEO Elon Musk in May, when he said the $35,000 option could become available between September and December.