Tesla (NASDAQ:TSLA) Tax Credit Axed in GOP Tax Bill, Stock Crashes
Thursday, Tesla Inc. (NASDAQ:TSLA), and other carmakers pushing to boost US EV (electric car) sales were dealt a sever blow by US House Republicans who proposed eliminating a $7,500 per vehicle tax credit that has helped drive current demand for the micro segment of the US car market.
When and if adopted, the repeal would take effect after the Y 2017 tax year, according to a Summary of the bill released Thursday by the House Ways and Means Committee as part of a sweeping overhaul of the US tax code that would eliminate some deductions and cut the corporate tax rate to 20%. The US Senate is crafting its own version.
Automakers from Detroit to Yokohama are betting big on an electric future with plans to spend billions of dollars on new pure-electric models to be rolled out in the coming years despite limited sales to date. Availability of the credit has been capped at the first 200,000 qualifying vehicles sold by each manufacturer.
No EV maker has reached that cap yet.
The elimination of the tax credit will halt any EV market in the US. There’s no Tesla Model 3, no Chevy Bolt, no Nissan Leaf in a market without incentives.
A premature end will have huge impact on Tesla, which is striving to scale up production of its least expensive electric car, the $35,000 Model 3 sedan. The company has said it has hundreds of thousands of would-be buyers holding reservations for the vehicle, the company is holding $1,000.00 on demand return deposits on the long delayed and yet to be produced car
Eliminating the credit will also impact other carmakers offering EVs which according to the Alliance of Automobile Manufacturers collectively offer more than 30 electric vehicle models in the US market.
Carmakers are under pressure to sell vehicles in higher volumes each year under an electric car sales mandate administered by regulators in California, 10 other states follow that policy.
There is no question that the elimination of the federal EV tax credit will impact the choices of prospective buyers and make the electric vehicle mandate in 11 states, about 33% of the market, even very difficult to meet.
Sales of electric vehicles have been held back by a lack of variety of electric models, high sticker prices fueled by expensive battery packs and limited driving ranges compared to gasoline-fueled vehicles.
“The EV tax credit repeal would cede US leadership in clean vehicles, putting our companies at a competitive disadvantage and threatening jobs while costing drivers more at the pump and increasing pollution,” the Director of the Natural Resources Defense Council’s Clean Vehicles and Fuels Project, said in a statement.
Volkswangen EV entry into the US econo EV market will destroy any prospects for the future of Tesla’s Model 3 and BMW entry into the luxury EV market will gut the demand for Tesla’s luxury version the Model S.
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