Elon Musk, CEO of Tesla, reminded buyers of his cars that the U.S. tax credit for his electric vehicles drops by half in 2019. The current credit is $7,500
To help customers, Tesla will release all cars ordered by customers before the end of the year. He wrote on Twitter, Elon Musk @elonmusk 17 hours ago “Tesla has released all cars for sale where original customer can’t take delivery before year-end, as well as test drive / display cars, which cost less.”
The incentive is viewed as a primary reason people buy electric cars. With a few other modest credits, the price of a base level Tesla Model 3 is cut from $46,000 to $32,200. General Motors Company makes a similar comparison to market its Chevy Bolt which has a base price of $36,620. With the federal tax credit and a few small incentives, this falls $29,995.
The credit dates back to the American Clean Energy and Security Act of 2009 (ACES). The credit for plug-in hybrids, which do not get all of their power from electricity can be as low as $2,500. Ultimately, one goal to the legislation was to help move the auto industry toward vehicles which use less fossil fuel and therefore are better for the environment.
The credit will not expire for all automakers are the same time. The legislation drops the tax credit by half once a car company has sold 200,000 vehicles, which Tesla has.
Experts are divided on what will happen when the tax credit is cut or eventually disappears. Donald Trump said he wants to kill the tax credit immediately when GM said it would close some plants and lay off American workers. The threat was considered a shot at GM’s electric car business and a threat to the company’s sales. The threat has not become a reality.
Some members of Congress are worried that the loss of the tax credit will hurt electric car sales. There is a chance new legislation will be introduced next year. It will extend the credit through 2019 and perhaps longer.
Musk is not taking a chance on what Congress may do, or what consumers may do if the effective price of electric cars rises. He is warning Tesla customers to get the full credit before it is too late.
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