Tesla Inc. has hit a key threshold for deliveries that mean the $7,500 federal electric vehicle tax credit for new owners is about to start being phased out. As first reported by news website Jalopnik, Tesla’s TSLA, +2.39% website now includes on its vehicles incentives support page the information that a customer who takes delivery of a vehicle on or before Dec. 31 is eligible for a $7,500 tax credit. From Jan. 1 to June 30, 2019, that credit is halved to $3,750, and halved again for the period from July 1 to Dec. 31, 2019.<doc-sep>Dennis Dorfman was hoping to replace his Toyota Prius with something sexier. When Tesla began taking reservations for the new Model 3 electric sedan in March 2016, Dorfman got in line at a Tesla retail store near his Calabasas home. He waited hours to lay down a $1,000 refundable deposit. That was two years and three months ago. He’s still waiting for his car. And now he’s worried that he might not get a $7,500 federal tax credit that was key to his purchase decision. “I’m frustrated,” Dorfman said. “A lot of people like me are frustrated.” Advertisement You’d think Tesla’s recent news would hearten him: The company announced Sunday it had managed to manufacture 5,000 cars in the last seven days of June, after months of what Chief Executive Elon Musk called “production hell.” On Monday, the company said it produced 28,578 Model 3s over the last three months. Dennis Dorfman is worried tax credits will disappear before Tesla starts manufacturing the $35,000 Model 3 he put down $1000 to buy two years ago. Meantime, he’s sticking with his Toyota Prius. (Jay L. Clendenin / Los Angeles Times ) Dorfman is not impressed. He bought into Musk’s promotion of the car, he said, as a $35,000 vehicle for the masses. The federal government’s $7,500 tax credit for buyers of electric cars would lower the price to $27,500. But no $35,000 Model 3 exists today. You can’t touch one for under $50,000. The company’s website says that the lower-range $35,000 model won’t be available for six to nine months. Dorfman said he no longer trusts Tesla’s timelines. His biggest concern: federal subsidies will run out before he gets his Model 3. “If I don’t get the full rebate, I won’t buy the car,” Dorfman said. It’s possible he won’t get it. Makers of all-electric cars and their buyers qualify for the $7,500 subsidy until the company sells a cumulative 200,000 vehicles in the United States. At that point, the full credit continues for a calendar quarter. For six months after that, the subsidy is reduced to $3,750. The next six months, $1,875. Then it disappears. The only other company that is close to the 200,000 threshold is General Motors, which sells the Chevy Volt and Bolt-EV electric cars. Researchers at the online publication Inside EVs said Tesla probably reached the 200,000-unit mark on its models 3, X and S in June. However, Tesla could have worked the numbers so the target will be hit in July, by shipping more cars to Canada, for example.Under Internal Revenue Service rules, the first subsidy cutback, to $3,750, would begin for cars delivered in October or January, depending on when the 200,000 limit is hit. Advertisement How many deposit-holders will bolt at that point is an open question, with serious implications for Tesla sales. On Monday, the company said it still holds refundable Model 3 deposits from 420,000 potential customers. Last week, Tesla said anyone with deposit money could now order a car, but the $35,000 vehicle isn’t available to be ordered yet. The online order would require an additional $2,500 deposit, and neither that nor the original $1,000 would be refundable. Customers don’t get a delivery schedule until they pay up. Efraim Levy, a stock analyst at CFRA Research, said that the high number of deposits indicates the end of subsidies won’t affect Tesla much. “There might be some people who drop out because their purchase is contingent on the tax credit, but I think there are ample buyers to replace any dropouts,” he said. Advertisement But Karl Brauer, executive publisher at Kelly Blue Book, wonders how many buyers exist for the higher-end Model 3s, which range in price from $50,000 into the $70,000s when options are added. Tesla’s high stock price is predicated, in part, on mass-market volume for the Model 3 — Musk originally had planned to make 400,000 Model 3s in 2018. With the delay of the $35,000 model and the reduction in subsidies, Tesla is “reducing or removing the average consumer from the equation,” Brauer said. New electric-car competitors are entering the market, with the $69,000 base-price Jaguar I-Pace SUV due to hit U.S. showrooms this year. Luxury-level electric cars from Audi and Porsche are set to follow early next year. Tesla will be at a price disadvantage as its subsidies fade away. That’s probably less of an issue at the high end, where car buyers are less price sensitive and $7,500 accounts for a smaller share of the car price, Brauer said. (California pays up to $2,500 in subsidies for electric cars; they are expected to remain in place even as federal subsidies reach their limits.) Advertisement “The phaseout will create some interesting market dynamics over the next few years, and automakers may have to adjust prices to keep their vehicles competitive,” said Colin McKerracher, head of advanced transport for Bloomberg New Energy Finance. Analysts agree that Tesla will make more cash — which it desperately needs — on its expensive, high-margin cars than it will on the $35,000 version. As Model 3s begin streaming to buyers in greater numbers, many of them report they’re happy with their cars. There have been reports of quality problems, though. And some deposit-holders are speaking out about the delays. “I don’t want to say lied to, but it seems like we’ve been duped, taken advantage of,” Dorfman said. “I don’t know (Musk) personally, but his statements, what people relied on, and what’s happened? Those are two different things.” Advertisement russ.mitchell@latimes.com Twitter: @russ1mitchell UPDATES: July 3, 7:00 a.m.: This story was updated with additional material to clarify IRS tax credit rules.<doc-sep>This week on the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy, including the new Tesla Model 3 production milestone and the controversy around it, the EV federal tax credit comes back into focus, and more. https://electrek.co/wp-content/uploads/sites/3/2018/07/Electrek-07-06-2018.mp3 The Electrek Podcast is me, Fred Lambert, editor-in-chief of Electrek, and Seth Weintraub, founder and publisher of Electrek and the 9to5 network, discussing all our top stories of the week while taking questions from our readers and highlighting the most insightful comments on the site. The show is live every Friday at 4pm ET on Electrek’s Youtube channel. As a reminder we’ll have an accompanying post, like this one, on the site with an embedded link to the live stream. Head to the Youtube channel to get your questions and comments in. After the show ends at around 5pm ET, the video will be archived on YouTube and the audio on all your favorite podcast apps through our RSS feed: https://electrek.co/podcastRSS. Grab the quick link to iTunes here. We now have a Patreon if you want to help us to avoid more ads and invest more in our content. We have some awesome gifts for our Patreons and more coming. Here are a few of the articles that we will discuss during the podcast today: Here’s the live stream for today’s episode starting at 4pm ET (or the video after 5pm ET): FTC: We use income earning auto affiliate links. More. Subscribe to Electrek on YouTube for exclusive videos and subscribe to the podcast.<doc-sep>
A tax credit worth $7,500 for Tesla customers will end next year, the company confirmed Thursday. Shares of the company sank 1.6% in trading following the news. Also on Thursday, employees told Bloomberg Businessweek they were forced to walk through raw sewage on the factory floor. Follow Tesla's stock price in real-time here. Shares of Tesla were down 1.7% in trading Thursday after it confirmed a lucrative tax credit will end next year, making its electric cars more expensive for potential customers. Additionally, a Bloomberg Businessweek profile outlined several possible safety hazards at Tesla's factory. Currently, people who purchase Tesla cars are entitled to an electric-vehicle tax credit from the federal government of $2,500 to $7,500. As Tesla wrote in an annual report filed with the US Securities and Exchange Committee in February, its customers get the full $7,500. But two calendar quarters after a company sells its 200,000th electric vehicle in the US, the tax credit begins to phase out. For the first six months of the phaseout, customers are eligible for 50% of the credit. That falls to 25% during the six months after that. After the full year, the company's customers are no longer eligible for that tax credit. That means Tesla customers will be able to receive the full credit until January, when they will be eligible for half of the credit for six months. Starting next July, they can receive 25% of the credit. The credit will expire for Tesla customers in January 2020. Tesla is the first automaker to begin the credit phaseout, which will impact some customers of its Model 3 sedan. The Model 3, which starts at $35,000, was designed to broaden Tesla's customer base beyond the luxury segment and accelerate the pace of electric-vehicle adoption. Also on Thursday, Bloomberg Businessweek published a profile of Tesla's race to build enough Model 3 sedans to meet its self-imposed goals. Tesla employees told the magazine they were forced to walk through raw sewage that had spilled on the factory floor over fear of causing production delays. "Just walk through it," paint shop employee Dennis Duran said he was told by managers. "We have to keep the line going." Another production associate, Mikey Catura, said some employees have developed a "zombie-like" stare after drinking large amounts of Red Bull, provided for free by Tesla, in order to make it through the 12- to 16-hour shifts. "Nothing is more important to us than the safety of our employees," a Tesla spokesperson told Business Insider. The company said it hit its goal, producing 5,031 Model 3s during the final week of June, prompting Musk to tell employees, "I think we just became a real car company." You can read the full Bloomberg story here . Mark Matousek contributed to this report.