Tesla Faces Threat as California Rebates for Electric Cars Run Out

Source: courtesy of Tesla Motors
The state of California’s fund to provide $2,500 rebates to state residents who purchase an all-electric vehicle has run out of money. Expectations are high that funding will be restored by the state legislature, but that may not happen until late summer or fall. This is not good news for Tesla Motors Inc. (NASDAQ: TSLA) and other makers of plug-in hybrid vehicles.

Sales of hybrids and all-electric cars accounted for 9.3% of all sales in California in 2013. In March Tesla sold an estimated 1,700 cars in the United States, according to, and Toyota Motor Corp. (NYSE: TM) sold 1,452 of its Prius plug-in hybrids. California pays a rebate of $1,500 to plug-in hybrid buyers. Buyers have six months from the date of purchase to apply for the rebates.

The federal rebate program, which pays rebates of up to $7,500 to buyers of electric vehicles, is not affected by the lack of funding in California.

Adding insult to injury, the state has also run out of the green carpool lane stickers. More than 38,000 of the stickers have been issued in California, and legislation has been introduced to add another 45,000 green stickers that allow drivers legally to drive in the carpool lane with fewer than two people in the car.

Buyers of a $70,000 Tesla Model S are unlikely to be thwarted by not getting a carpool lane sticker, but losing $2,500 in cash could slow sales until the California legislature acts. Cash incentives really do improve the uptake of electric cars, as proved by Tesla’s new position as the best-selling car in Norway.

Tesla stock was trading down 5.2% Friday afternoon, at $213.70 in a 52-week range of $40.33 to $265.00.

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