Tesla has delivered 200,000 vehicles, the company reported Thursday, meaning the automaker will likely begin running out of the tax credits necessary to keep the electric vehicle market alive.
Tax credits for Tesla’s major vehicles will now be reduced 50 percent every six months until it is completely phased out. The change gives rivals such as Mercedes-Benz, BMW AG and Audi AG the upper hand, as they bring electric models to the market with a full tax credit in place.
The $7,500 tax credit will drop starting Jan 1, 2019, to $3,750 around mid-year, according to Tesla’s website. GM is entering a similar stage — it is expected to hit the 200,000 vehicle point with sales of its Chevrolet Bolt EV, among other vehicles.
Tesla still gets tax credits in California, where the Silicon Valley company sells the most vehicles. (RELATED: California Considers Tossing Tesla A Lifeline As Federal Tax Credits Run Out)
The bulk of Tesla’s Model S fleet were sold in California in 2015, according to Edmunds, a group that researches automotive sales in the U.S. Californians made up nearly 50 percent of Tesla’s customers that year. The next nine states made up nearly 33 percent, while the remaining 40 states combined were below 22 percent of Tesla’s overall market.
Phasing out the tax credits would still likely harm Tesla. Data shows the elimination of the tax credit could be a possible death knell for Tesla, especially considering the company’s inability to mass produce vehicles at the scale of its larger competitors.
A data analysis conducted by The Wall Street Journal in July 2017 shows there were no new Tesla Model S sedans and Model X SUVs registered in Hong Kong the month after that country revoked the tax credit.
There were 2,939 Tesla vehicles registered in March of that year before the April 1 redaction of the credit, according to TheWSJ, and nearly 3,700 entering the department’s books for the first quarter of 2017.
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