The reintroduction of the electric vehicle tax incentive credit could be a nail in the coffin to Tesla’s competitors as if the company needed any more help to bury its competitors into the ground officially.
Earlier this week, it was reported that Tesla could be primed to receive the new EV incentives that would grant a $7,000 tax credit to the first 600,000 Tesla EVs sold in the United States. The new GREEN Act indicates that the number of applicable EVs per manufacturer would increase by 400,000 cars, from 200,000 to 600,000, making a considerable number of Tesla’s projected sales for 2021 reasonably less expensive for car buyers.
While Tesla didn’t give an exact estimation for how many cars it plans to build this year, several analysts have projected numbers between 800,000 and 950,000. However, Tesla’s Q4 Earnings Update Letter has a total output of 1,050,000 between its two active production facilities.
The GREEN Act states:
“The bill also extends existing tax incentives available for the sale of electric vehicles. The bill increases the electric vehicle credit cap for manufacturers to 600,000 vehicles, but reduces the credit by $500 after the first 200,000 vehicles sold. This would replace the current phaseout period that begins with 200,000 vehicles sold, with a phaseout period that instead begins during the second calendar quarter after the 600,000-vehicle threshold is reached.
“At the start of the new phaseout period created under the bill, the credit is reduced by 50 percent for one calendar quarter and subsequently ends. For manufacturers that already passed the 200,000 threshold before the enactment of the bill, the number of vehicles sold in between 200,000 and those sold on the date of enactment are excluded in determining when the 600,000 threshold is reached.”
Tesla is sitting pretty if this happens to go through. For several reasons, the reintroduction of the EV incentive to Tesla’s cars could effectively bury conventional automakers who have not put a more serious and specific focus on the development of electric powertrains.
It is no secret that the future of vehicles is electric. While classic muscle cars will likely always be in existence for decades to come, mass-market vehicles from other manufacturers, like Ford Escapes, Honda Civics, Toyota Camrys, and Chevy Malibus, will fade away. Let’s be honest with each other here: Nobody is collecting any of them; they just don’t have the “it” factor that a classic vehicle has.
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Even today’s Mustangs, Camaros, and Corvettes don’t hold the value, the sentimental meaning, or the history that early builds have. And even worse, they don’t have the performance, the speed, or the technology and efficiency that an electric car has. EVs are the best of both worlds, and when you buy a Tesla, there is no better car to display that in the most exaggerated manner.
Subtracting another $7,000 from the price of any of Tesla’s vehicles thanks to the GREEN Act would be game over. The Model 3 SR+ would be well below the average cost of a car in the United States today while offering environmentally-friendly transportation, acceleration that is well beyond the norm for a combustion engine car, and pricing that just cannot be matched by some of the “luxury, high-performance” vehicles that are offered in today’s market.
Comparative to the Tesla Model 3 SR+ is the 2021 Mercedes-Benz CLA-Class. Both start at price points slightly below $38,000, but the specs speak for themselves. The Model 3 has a significantly faster 0-60 time at 5.3 seconds, while the Benz sits at 6.2. The quarter-mile race wouldn’t be close either, with the CLA getting to the line in 13.8 seconds. The Model 3 would be finished in 13.1, according to Matthew Cjel, who did three 1/4-mile runs with his SR+ and got times of 13.185, 13.181, and 13.218.
While competitive without the incentive, pricing wouldn’t be close if the $7,000 credit was applied. That would bring the Model 3 to just under $31,000. Additionally, the CLA only gets 25 MPG City and 35 MPG highway. With spiking gas prices, that would be a considerably frequent trip to the local Shell station. The Model 3 gets 263 miles per charge and can be charged from home or at a local Supercharger for a fraction of the price.
This is just one example of where the $7,000 credit would make EVs more appealing than gas cars to those who remain on the fence. Price parity is becoming an outdated argument, and with Tesla’s battery advancements and increased production rates, cars will only become less-expensive every year. Soon enough, Tesla’s $25k mass-market vehicle will hit the roads, and there will be an overwhelming sense of demand from new car buyers. The initial 600,000 EVs will likely disappear as fast as turkey on Thanksgiving, making the tax credit obsolete in virtually no time.
The only real concern that could arise from the new credit is it is likely to increase demand significantly, which could bring issues for Tesla’s projects that have been delayed due to battery constraints. I don’t know how more 3 and Y purchases, along with S and X, would affect Roadster, Semi, or Cybertruck production. However, Tesla is battery constrained, and available cells would likely be subjected to the S3XY lineup, which could further delay the other projects.
Demand is never a bad thing, though. The higher sales of its mass-market vehicles would give Tesla even more capital to invest in battery manufacturing and tech. It would give them more money to source cells from third-party suppliers. It also would only help the company’s financials for many quarters to come. But battery shortages have halted the Semi and Roadster project several times, and the Cybertruck now seems like it could be subjected to the same issues. It seems like Musk could have been hinting toward that in the podcast with Rogan yesterday, where he said that they can “hopefully” begin volume production next year. During the Q4 EC, Musk also said:
“If we get lucky, we’ll be able to do a few deliveries toward the end of this year, but I expect volume production to be in 2022.”
Let’s hope things continue to expand in a timely fashion, I think the EV incentive and the long list of advantages that EVs have over their ICE competitors will be recognized by everyone who remains in limbo over which power source will “fuel” their next vehicle.
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