Lowering The Price Of Electric Vehicles Is Supposed To Be Tesla's Unusual Strategy To Generate Demand In The US Market
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Tesla has slashed the prices of some of its vehicles sold in the US by nearly 20% to lure in new buyers. The cuts, which include Tesla's deal, are likely to allow some buyers to qualify for the $7,500 federal tax credit.
Tesla cut prices
Tesla's decision to lower the price of several of its models will allow more buyers to qualify for the $7,500 federal electric vehicle tax credit.
Tesla has lowered the price of its entry-level Model Y crossover to $52,990 and lowered the price of the high-performance version of the Model 3 sedan to $53,990. The car company has slashed the price of its entry-level Model Y crossover by almost 20% to $52,990, excluding some fees. This allows buyers to qualify for the tax incentive by placing the vehicle below the $55,000 ceiling. Tesla's 14% cut to the price of the high-performance version of the Model 3 sedan, which currently sells for $53,990.
The Model 3 and Model Y are Tesla's best-selling vehicles and account for the bulk of the company's production. The company also lowered the prices of its Model S luxury sedans and Model X sport utility vehicles.
The price cuts come a week after Tesla slashed prices in China by as much as about 13% after shipments of cars made in Shanghai fell in December. The company has also lowered prices in Europe.
A tax credit reduces your income tax dollar for dollar, so the EV credit is like getting up to $7,500 off the purchase price of your car. The credit is nonrefundable, meaning you won't get a tax refund for any unused portion of the credit, and you can't carry it over to use on a future tax return.
The credits are meant to be an incentive for car buyers to switch to electric, but the changes are confusing for buyers to navigate, especially as they keep changing.
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Tax credits for electric vehicles
Tax credits for electric vehicles were created in 2009, but late last year the government changed many of the rules. Removed the limit on the number of vehicles sold per manufacturer and added limits based on vehicle price, manufacturer location, and taxpayer income. Vehicles must be assembled in North America and must have a manufacturer's suggested retail price of $80,000 for vans, SUVs, and pick-ups, or $55,000 for all other vehicles.
Taxpayers with a modified adjusted gross income of $150,000 for individuals or $300,000 for joint filers are no longer eligible for the tax credit.
Revenue limits apply to vehicles that are "put on the road" from January 1, which is the date of commencement of use. So if you buy an EV this year, income limits apply. If you bought an electric car last year but haven't picked it up by this year, income limits also apply.
Tesla share prices
Tesla's share price this year rose from 108.10 to 123.22. The first drop occurred on Friday. Tesla shares fell 0.9% on Friday. The stock fell about 65% last year, its worst annual performance. The stock sell-off came amid the temporary closure of Tesla's Chinese car factory, recession fears and Musk's focus on running Twitter, which he bought in October last year.The current price is at 122.40.
Source: wsj.com, finance.yahoo.com
