Tesla planning for the end of EV tax credits

Tesla might have to shift its production plans for its Model 3 sedan in order to maximize the number of federal tax credits available to buyers.

U.S. buyers of electric vehicles are currently eligible for up to a $7,500 federal tax credit, with all Tesla vehicles — including the Model 3 — qualifying for the maximum rebate. However, that credit starts to decline after an automaker hits 200,000 EVs, meaning most of the 325,000 people already signed up to buy the Model 3 might miss out on the full tax rebate.

Although there isn’t a loophole to prevent the tax credit from drying up, there is a way to extend the program. The IRS’ rules state that the tax credit will be cut at the end of the quarter following the one in which an automaker hits that 200,000 EV limit, so Tesla could intentionally hit that magic number on the first day of the quarter, ensuring the maximum number of tax credits to buyers.

“We always try to maximize customer happiness even if that means a revenue shortfall in a quarter,” Tesla CEO Elon Musk said on Twitter.

Tesla doesn’t release specific U.S. sales figures, but it’s estimated that the electric automaker has sold about 71,500 combined units of its Model S sedan and Model X crossover.

Although some Model 3 buyers will miss out on the full tax credit, partial rebates will be available. After hitting the 200,000 unit sales mark the credit drops in half to $3,750 for the next two quarters. That figure is halved again for another two quarters before expiring entirely.

There has been some discussion in Washington about extending the program beyond 200,000 units, but so far nothing has been set in stone. Whatever the case, Tesla plans to be up front and honest with its buyers about the tax credit system.

“We are committed to providing customers with up-to-date information about current incentives at the time of purchase,” Tesla spokeswoman Alexis Georgeson told Automotive News. “We’ll do the same when it’s time for customers to confirm their Model 3 orders.”

The Tesla Model 3 is scheduled to go on sale in late 2017.