With a starting price of around $70,000, the Tesla Model S costs more than twice the average new car transaction price in the U.S. Those well-off to be able to buy one though also get a generous $7,500 Federal tax rebate, on top of any state incentives, taking a sizable chunk off of the MSRP even on the better-equipped versions.
All this government money will add up, and by the time the $7,500 tax credit phases out, Tesla owners could end up claiming more than $1.5 billion. By the time the Tesla Model III rolls out, there might not be many Tesla tax credits left.
The IRS has imposed a 200,000 unit per manufacturer limit on the credit, of which Tesla owners may have claimed as many as 60,000 by the end of this year. It’s hard to know for sure, as Tesla doesn’t release detailed sales figures, so it’s hard to know how many Teslas are sold in America, versus Europe, China, and the rest of the world. If Tesla manages to stick with its aggressive timeline though, it will produce 75,000 vehicles in 2015, and 100,000 in 2016. The IRS only says that the credit runs out after production of 200,000 plug-in vehicles, not 200,000 rebates, which means that by the time the $35,000 Tesla Model III won’t be eligible for that $7,500 discount.
Instead, only buyers who can afford to plunk down $70,000+ on a Model X or Model S will be able to take advantage of the program, and if all of them do, it would cost taxpayers $1.5 billion. This includes a number of celebrities like rapper/producer Jay-Z, NBA player Mike Conley, actor Seth Green, and actress Cameron Diaz. Many of these people could have afforded to buy the Model S regardless, but I’d be surprised if any of their accountants didn’t take advantage of the tax credits.
There’s also numerous state incentives to consider, which in California is an additional $2,500 and in Georgia is a heady $5,000 per vehicle. Of course this assumes each and every Tesla owner is in the U.S., and actually claims the tax credit. California is also considering an amendment that would tie the state rebate to income levels, but nothing like that has been proposed on the national level.
Of course the Model S isn’t the only EV with access to incentives; both the Chevy Volt and Nissan LEAF can take full advantage of the $7,500 tax credit, and both have racked up substantial sales as well. But Tesla seems to have the wind at its back, and could exhaust its tax rebates before either vehicle, and at a substantial cost. As of May, Nissan had sold an estimated 50,000 LEAF EVs in the U.S.; Tesla is probably close to that, even though the LEAF enjoyed more than a year head start.
One could make the argument that the government has helped pave the way for Tesla’s success, especially when you add in the $465 million low-interest government loan Tesla used to get started. Granted, Tesla paid it back early, and other automakers got even more assistance from the same loan program, but it still helped Tesla, perhaps immeasurably. As an advocate for EVs, I certainly feel like it’s the right thing to do, especially given the embedded advantages petrol-powered cars enjoy…but as a taxpayer, it still gets under my skin a little bit that by the time a Tesla I can afford goes on the market, the rich people will probably have used all the tax credits up. And if you ask me, I’m allowed to think it’s a good idea, and still be a little bit bothered by it. I guess I shoulda made my first million by now.
Tell me your thoughts on Tesla’s generous tax subsidies; is it money well spent, or just more hidden corporate welfare?