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Time-out of tax credit for Tesla buyers



The reduction of tax credit makes the purchase of Tesla more expensive, because credit reduces the federal tax bill for buyers. So Tesla may suffer a drop in sales or feel pressured to cut prices, which would be bad news for a company struggling to return to profitability.

"When Tesla loses any part of the credit, it loses any segment of its customer base," said Karl Brauer, publisher of the Kelley Blue Book. "It will never help them sell more cars, it will only hurt."

Buyers of plug-in cars, both pure electric and plug-in hybrids, qualify for a $ 7,500 credit that reduces their federal fees by that amount. But once a manufacturer has sold 200,000 of these cars to US buyers, the credit begins to be phased out.

Tesla ( TSLA ) was the first to strike this mark, and the credit for their buyers fell to $ 3,750, January 1
. On Monday, July 1, it will reject $ 1,875. General Motors ( GM ) is the only other automaker that has sold enough cars to reduce tax credit. But it won't happen to GM until October. To receive the tax credit, a buyer must bring a car within the deadline, not just order it.

Most of the $ 7,500 taxes went to buyers of the Tesla Model S and Model X, two luxury models that could cost more than $ 100,000 with options. Model 3, a cheaper car targeting the mass market, can cost between $ 50,000 and $ 60,000 with various options such as a longer battery system and self-powered features.

But model 3 buyers, who have a starting price of just over $ 35,000, need the tax credit more than the richer model S or model X buyers, Brauer said.

"Model 3 is still an expensive car for everyman," he said. "They need as much of a credit as they can get."

Tesla made a big step to getting cars delivered to buyers in December, before the credit dropped for the first time. It even sold customers floor models that were used for test stations.

Tesla has made less fuss this time. The company's spokespersons did not respond to CNN Businesses' questions about the deadline or the potential credit impact on the sale. President and CEO Elon Musk said in a tweet two weeks ago that customers could book a car online and return it within seven days of delivery for full refund if they were not happy with the car.

The slow decline in the tax credit puts Tesla in a clamp.

In December, the sales acquisition was encouraged to buy, but it contributed to a large drop in sales in the first quarter of 2019. At the beginning of January, Tesla announced a $ 2,000 price decline, but hurt profits and Tesla lost money in the first quarter after a couple of profitable quarters.
In Washington, some lawmakers have proposed restoring the entire $ 7,500 tax credit to all car manufacturers until they sell 600,000 plug-in cars. Competing legislation to eliminate tax credits in full and impose a federal tax on electric cars has also been introduced. Neither bill has had as much as a committee hearing, let alone a voice.

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