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| Tesla Scrambles to Sell Cars Before a Tax Break Fades | |
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| This year, Mitch Mallin bought a metallic blue Tesla Model 3 sedan equipped with heated seats and a bevy of other options, all for $56,000 — twice as much as he had ever paid for a car before. | This year, Mitch Mallin bought a metallic blue Tesla Model 3 sedan equipped with heated seats and a bevy of other options, all for $56,000 — twice as much as he had ever paid for a car before. |
| The final cost will be lowered by a $7,500 federal tax credit, a bonus available to buyers of electric vehicles. | The final cost will be lowered by a $7,500 federal tax credit, a bonus available to buyers of electric vehicles. |
| Mr. Mallin, a retired actuary from Farmington Hills, Mich., said he probably would have bought the car even without the tax credit because he wanted to “participate in the movement” to fight global warming and drive zero-emission cars. | Mr. Mallin, a retired actuary from Farmington Hills, Mich., said he probably would have bought the car even without the tax credit because he wanted to “participate in the movement” to fight global warming and drive zero-emission cars. |
| Still, the credit “was factored in,” he said. “It’s almost like a rebate.” | Still, the credit “was factored in,” he said. “It’s almost like a rebate.” |
| But not for much longer. Under federal rules, the full tax credit is available only on the first 200,000 cars that a manufacturer sells in the United States; two quarters later, the credit is reduced. Tesla reached that threshold in July. As a result, the credit available to Tesla buyers will fall to $3,750 for cars delivered on or after Jan. 1, then will be halved again on July 1 and go away completely in 2020. | But not for much longer. Under federal rules, the full tax credit is available only on the first 200,000 cars that a manufacturer sells in the United States; two quarters later, the credit is reduced. Tesla reached that threshold in July. As a result, the credit available to Tesla buyers will fall to $3,750 for cars delivered on or after Jan. 1, then will be halved again on July 1 and go away completely in 2020. |
| The phaseout could hurt Tesla’s ability to reach a broader group of car buyers. The company’s lineup starts at nearly $50,000, before incentives, for the Model 3 and climbs to $140,000 for a top-of-the-line Model X sport utility vehicle. Tesla has long promised an entry-level Model 3 that would cost $35,000, but the company has acknowledged that it could not sell that car profitably right now. | The phaseout could hurt Tesla’s ability to reach a broader group of car buyers. The company’s lineup starts at nearly $50,000, before incentives, for the Model 3 and climbs to $140,000 for a top-of-the-line Model X sport utility vehicle. Tesla has long promised an entry-level Model 3 that would cost $35,000, but the company has acknowledged that it could not sell that car profitably right now. |
| “How many buyers are there out for a $60,000 car?” asked Karl Brauer, executive publisher of the auto information providers Autotrader and Kelley Blue Book. “There’s always the possibility Tesla is going to hit the saturation point.” | “How many buyers are there out for a $60,000 car?” asked Karl Brauer, executive publisher of the auto information providers Autotrader and Kelley Blue Book. “There’s always the possibility Tesla is going to hit the saturation point.” |
| In the last month, Tesla and its chief executive, Elon Musk, have been scrambling to sell as many cars as possible before the end of the year. | In the last month, Tesla and its chief executive, Elon Musk, have been scrambling to sell as many cars as possible before the end of the year. |
| “You may be able to get a Tesla before the $7500 US tax credit drops in 2 weeks, even if you haven’t placed an order yet,” Mr. Musk said via Twitter on Dec. 15. | “You may be able to get a Tesla before the $7500 US tax credit drops in 2 weeks, even if you haven’t placed an order yet,” Mr. Musk said via Twitter on Dec. 15. |
| Last week, Mr. Musk went even further by pledging to reimburse customers if delivery problems caused them to get a tax credit of $3,750 instead of $7,500. | Last week, Mr. Musk went even further by pledging to reimburse customers if delivery problems caused them to get a tax credit of $3,750 instead of $7,500. |
| “If Tesla committed delivery & customer made good faith efforts to receive before year end, Tesla will cover the tax credit difference,” he said in a tweet. | “If Tesla committed delivery & customer made good faith efforts to receive before year end, Tesla will cover the tax credit difference,” he said in a tweet. |
| The company’s sales centers have been telling prospective customers that the company has hundreds of Model 3s in inventory around the country and can deliver cars to buyers within 48 hours in many cases. Its Indianapolis showroom, because it is close to a large inventory lot, has been offering same-day deliveries to walk-in customers. | The company’s sales centers have been telling prospective customers that the company has hundreds of Model 3s in inventory around the country and can deliver cars to buyers within 48 hours in many cases. Its Indianapolis showroom, because it is close to a large inventory lot, has been offering same-day deliveries to walk-in customers. |
| Some analysts said they doubted that the halving of the tax credit alone would slow sales next year. Many of the company’s customers are well-off professionals, dedicated environmentalists or devoted believers in Tesla who would most likely be unfazed by the loss of tax credits. | Some analysts said they doubted that the halving of the tax credit alone would slow sales next year. Many of the company’s customers are well-off professionals, dedicated environmentalists or devoted believers in Tesla who would most likely be unfazed by the loss of tax credits. |
| “I think there’s still so many people who want to buy a Model 3 and are willing to pay a lot of money for it,” said David Whiston, an auto analyst at Morningstar. “I’m not worried about it.” | “I think there’s still so many people who want to buy a Model 3 and are willing to pay a lot of money for it,” said David Whiston, an auto analyst at Morningstar. “I’m not worried about it.” |
| Despite protracted manufacturing glitches — customers had to wait several weeks to take delivery of a Model 3 — and the legal troubles of Mr. Musk, Tesla had a breakout year in sales. In the first three quarters of 2018, the company delivered more than 154,000 cars, including 82,000 Model 3 sedans. In all of 2017, the company sold just 101,000 cars. | Despite protracted manufacturing glitches — customers had to wait several weeks to take delivery of a Model 3 — and the legal troubles of Mr. Musk, Tesla had a breakout year in sales. In the first three quarters of 2018, the company delivered more than 154,000 cars, including 82,000 Model 3 sedans. In all of 2017, the company sold just 101,000 cars. |
| The surge in Model 3 production and sales helped drive Tesla to a third-quarter profit of $312 million, it’s first quarterly profit in two years and its largest ever. | The surge in Model 3 production and sales helped drive Tesla to a third-quarter profit of $312 million, it’s first quarterly profit in two years and its largest ever. |
| Dr. Peter Bankoff, an anesthesiologist with homes in Arizona and Colorado, took delivery in August of a silver, all-wheel-drive Model 3 that cost $65,000. He reserved the car in March 2016 and was so eager to get it, he didn’t think much about the tax credit. | Dr. Peter Bankoff, an anesthesiologist with homes in Arizona and Colorado, took delivery in August of a silver, all-wheel-drive Model 3 that cost $65,000. He reserved the car in March 2016 and was so eager to get it, he didn’t think much about the tax credit. |
| “I’m sure I’ll use the credit, but after waiting two and a half years for the car, I was going to buy it no matter what,” Dr. Bankoff said. He’s enthralled by the car, too. “It’s the most fun you can have with your clothes on,” he said. | “I’m sure I’ll use the credit, but after waiting two and a half years for the car, I was going to buy it no matter what,” Dr. Bankoff said. He’s enthralled by the car, too. “It’s the most fun you can have with your clothes on,” he said. |
| That Tesla has so many customers willing to pay full price for a Model 3 is a reflection of the strength of the company’s brand and its success in drawing luxury car buyers. In the first nine months of the year, Tesla reported sales that exceeded those of more established brands like Volvo, Acura, Infiniti, Lincoln and Cadillac, and trailed only Mercedes-Benz, BMW, Audi and Lexus. | That Tesla has so many customers willing to pay full price for a Model 3 is a reflection of the strength of the company’s brand and its success in drawing luxury car buyers. In the first nine months of the year, Tesla reported sales that exceeded those of more established brands like Volvo, Acura, Infiniti, Lincoln and Cadillac, and trailed only Mercedes-Benz, BMW, Audi and Lexus. |
| Dr. Rob Frank, a plastic surgeon from Oak Park, Ill., had been driving an Acura TL until the end of October, when his Model 3 arrived. While he loves the car’s acceleration, he said, it wasn’t just technology that drew him in. | Dr. Rob Frank, a plastic surgeon from Oak Park, Ill., had been driving an Acura TL until the end of October, when his Model 3 arrived. While he loves the car’s acceleration, he said, it wasn’t just technology that drew him in. |
| “I like Elon’s vision for the company,” Dr. Frank said. “I like what he’s trying to do.” The tax credit, he added, had no impact on his buying decision. | “I like Elon’s vision for the company,” Dr. Frank said. “I like what he’s trying to do.” The tax credit, he added, had no impact on his buying decision. |
| Tesla isn’t the only automaker dealing with a tax-credit phaseout. General Motors is expected to pass the 200,000 sales mark as early as this month. The credit is available now on the Chevrolet Volt, a plug-in hybrid, and the all-electric Chevrolet Bolt. In the first 11 months of 2018, G.M. sold more than 32,000 Volts and Bolts. | Tesla isn’t the only automaker dealing with a tax-credit phaseout. General Motors is expected to pass the 200,000 sales mark as early as this month. The credit is available now on the Chevrolet Volt, a plug-in hybrid, and the all-electric Chevrolet Bolt. In the first 11 months of 2018, G.M. sold more than 32,000 Volts and Bolts. |
| The market for electric cars will soon become much bigger as manufacturers like Audi and Mercedes-Benz begin selling new models that will be eligible for the full $7,500 tax credit for some time. In the first half of 2019, Audi is expected to begin offering the E-Tron, a battery-powered S.U.V. that would be a direct competitor of the Model X. The E-Tron is expected to have a starting price of about $75,000. | The market for electric cars will soon become much bigger as manufacturers like Audi and Mercedes-Benz begin selling new models that will be eligible for the full $7,500 tax credit for some time. In the first half of 2019, Audi is expected to begin offering the E-Tron, a battery-powered S.U.V. that would be a direct competitor of the Model X. The E-Tron is expected to have a starting price of about $75,000. |
| Mercedes-Benz is expected to introduce a small electric sedan next year to compete with the Model 3. | Mercedes-Benz is expected to introduce a small electric sedan next year to compete with the Model 3. |
| Knowing that it could be harder to sell its cars in 2019, Tesla appears to be doing everything it can to close sales before the end of the year. | Knowing that it could be harder to sell its cars in 2019, Tesla appears to be doing everything it can to close sales before the end of the year. |
| The company is making available for sale vehicles that have been used as demonstration models, and others that had been assigned to customers who are planning to take delivery after the first of the year. Since October, Tesla has also allowed customers who buy without a test drive three days to return the car for a full refund, a step that makes it less risky to buy a Tesla sight unseen — something Mr. Mallin, the retired actuary, did. | The company is making available for sale vehicles that have been used as demonstration models, and others that had been assigned to customers who are planning to take delivery after the first of the year. Since October, Tesla has also allowed customers who buy without a test drive three days to return the car for a full refund, a step that makes it less risky to buy a Tesla sight unseen — something Mr. Mallin, the retired actuary, did. |
| “I hadn’t even sat in one before I bought mine,” he said. | “I hadn’t even sat in one before I bought mine,” he said. |