Tesla’s ugly week now looks even worse, with GOP plan to strip tax credits from electric cars

A week in which Tesla had to tell the world about delayed Model 3 production and a record quarterly loss took a turn for the worse with the release of the U.S. Republicans’ tax plan.

The Palo Alto electric car maker was already mired in a recent controversy over hundreds of employees who lost their jobs. When CEO Elon Musk in a Nov. 1 conference call was breaking the bad news about the delay of its much-hyped entry-level sedan and a $619 million third-quarter loss, he took the opportunity to attack the media for reports suggesting the employment losses may have represented mass layoffs rather than performance-related terminations.

But the media were only the messengers for another helping of trouble for Tesla and other makers of electric vehicles.

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“The ambitious plan to rewrite the tax code championed by President Donald Trump and the GOP would end the tax credit that ranges between $2,500 and $7,500 for a new (electric vehicle) purchased for use in the U.S., according to the Internal Revenue Service.,” The Verge reported Nov. 2.

For Tesla, removal of the tax credit threatens Musk’s quest to make his technology mainstream on the world’s roadways, according to Bloomberg. Tesla developed the $35,000 Model 3 — which is now three months behind schedule with fewer than 300 delivered out of nearly half a million pre-ordered — in a bid to bring electric cars to ordinary folks. The car maker’s other two models are considerably more costly.

“The less-expensive Model 3 — and the credits that make it even more affordable to more households — are pivotal to Musk’s mission for electric cars to be accepted by the masses,” Bloomberg reported Nov. 2.

Scott Mercer, CEO of electric vehicle-charging network Volta Charging, said if the tax credit does end up being cut, that will “definitely” have an impact on adoption of electric vehicles (EVs) in the U.S.

“It slows our ability to become competitive in what has become a global level of EV adoption,” Mercer told The Verge. 

Tesla’s stock, which had already been sliding since mid-October, plummeted after the Nov. 1 quarterly results announcement. By 4:30 p.m. Nov. 2, it stood in after-hours trading at $299.40, a 17 percent drop from $359.65 on Oct. 18.

 

 

Photo: In a Sept. 29, 2015, file photo, Elon Musk, CEO of Tesla Motors Inc., talks about the Model X car at the company’s headquarters, in Fremont, Calif. Unable to string together profitable quarters, electric car and solar cell maker Tesla Inc. reported a loss for the last three months of 2016. (AP Photo/Marcio Jose Sanchez, File)

 

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  • Isn’t That Something

    I don’t feel that losing the rebate will hurt sales for Tesla. Most buyers on the waiting list wern’t going to get the full amount and many maybe nothing.

  • JB

    This will actually help Tesla.

    Tesla has sold enough EVs that the tax credit will start to taper off by the way the tax credit is written. That means that other car makers that have less popular EVs will getting the full tax credit, while Tesla is not. So, if the tax credit goes away completely, then the playing field will be level. Elon Musk has said this himself.

  • RS

    I do not think Tesla minds. The credits for them are about to phase out due to reaching the production threshold. Musk has stated numerous times he is in favor of ending them.

  • Arthur Burnside

    Tesla should be jumping for joy that the credits are being killed. Otherwise they would be in the impossible position of having to compete against more than 120 EVs being produced by dozens of automakers over the next several years, all of whom would have a $7500 price advantage. Only Barrons seem to understand this rather obvious picture.
    Auto stock analysts and especially journalists, are pretty ignorant,I would say.

 
 
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