Tesla will be reducing the prices of all of their vehicles by $2,000 dollars due to the recent reduction of their federal tax credit. Previously, purchasers of Tesla vehicles were entitled to a $7,500 dollar federal tax credit. In the budding years of Tesla Motors, plug-in motor cars were very niche and didn’t have much in the way of market viability. The federal tax credit, was implemented in order to help with this by incentivizing purchasing plug-in electric vehicles. However, this federal tax credit is not a permanent thing. As electric cars grow in popularity, the tax credit reduces since it is no longer needed.
In the Summer of 2018, Tesla achieved quite the milestone by selling over 200,000 vehicles in the United States. This milestone is the first in several that would reduce the federal tax credit that buyers of Tesla cars would receive. After the 200,000 mark, the tax credit was to be cut in half, which it has been as of the new year.
The question now is what price will Tesla’s vehicles settle on? By 2020, the federal tax credit will be gone entirely. Tesla’s goal is to make electric cars that are affordable for the average consumer, but that doesn’t mean they can keep reducing the price. They also need to maintain profitability, and that’s what has investors worried. This coupled with Tesla failing to meet Wall Street’s delivery expectations resulted in their stock prices dropping 9% today.
Tesla has six months until the federal tax credit is halved again, and then another six months before it is gone completely. They’ve got a limited time frame to figure out what to do.
