We take a look at the new EV tax credit and which Teslas qualify

The new EV tax credit will only apply to some Teslas

Tesla

The Inflation Reduction Act (a sweeping $750 billion health care, tax and climate bill) was signed into law by President Joe Biden.

Included in the package are some incentives that will make buying electric cars in the US more affordable. The caveat is some of the most popular EVs being sold won’t see any difference.

A tax credit of up to $7,500 will be offered to purchasers of new all-electric vehicles and hybrid plug-in vehicles through 2032. For used versions of these vehicles, the plan would also establish a supplementary tax credit worth a maximum of $4,000.

However, the legislation also introduces additional restrictions on who can be eligible for the credit and which vehicles are eligible for it.

For brand-new cars, the manufacturer's suggested retail price for sedans must be less than $55,000 in order to qualify for the tax credit. For SUVs, trucks and vans, the maximum price would be $80,000.

That price cap effectively leaves out the Tesla Model X and Model S, which start at over $100,000, alongside other premium vehicles like the Mercedes EQS, Porsche Taycan, and GMC Hummer. Some of the more expensive configurations of the Tesla Model 3 won't qualify either.

Which Tesla Models Qualify

The only Model 3 that would currently qualify is the entry-level, rear-wheel drive model, which costs around $47,000. This model would be able to take full advantage of the federal tax credit.

Tesla recently discontinued orders for the all-wheel drive Model 3 Long Range model, which could have made the $55,000 cutoff if it received a small price reduction. It'll be interesting to see if Tesla begins to offer that model again in the near future.

The Model 3 rear-wheel drive is the only Tesla that is currently sold for under $55,000. Luckily Tesla's Model Y vehicles are classified as SUVs and will also classify under the truck, vans and SUV portion of the tax credit.

Since SUVs can cost up to $80,000 USD and still qualify for the full tax credit, both Model Ys will qualify as well, including the Performance model which currently comes in at just under $70,000.

This is significant, given that the Model Y and Model 3 are currently the most popular EVs in the United States. In the first half of 2022, more Model Y and Model 3s were sold in the United States than the combined sales of the next ten most popular EVs.

Used electric vehicles must be at least two model years old in order to qualify. The price cap would be $25,000 and the credit would be limited to the lesser of $4,000 or 30% of the cost of the vehicle.

Other hurdles include a requirement for the final assembly needs to be in North America. That should exclude EVs manufactured by Hyundai Motor, Kia, Audi, and Polestar Automotive. Those firms assemble EVs sold in the U.S. in Asia and Europe.

Additionally, the criteria for the EV purchase credit will alter. For instance, there are specifications for the locations of battery pack assembly and the sourcing of battery components. Those specifications appear to be intended to strengthen the American EV supply chain. Around 2024, these new complexities go into effect. The list of approved automobiles is maintained by the Treasury Department.

It's important to note that the existing $7,500 tax credit, which was established in 2008 and 2009 in order to encourage the adoption of electric cars, included a phase-out provision that would apply if a manufacturer sold 200,000 of the vehicles. 

Tesla reached that mark in 2018, and as of right now, its electric vehicles are not eligible for the tax credit. The same applies to General Motors and Toyota (including its Lexus brand). But thanks to the revised bill's removal of the 200,000 sales cap, their electric cars would once again be eligible for the credit.

Additionally, single taxpayers with modified adjusted gross income beyond $150,000 would not be eligible for the credit. This income cap would be $300,000 for married couples filing jointly and $225,000 for single people filing as heads of household.

It might seem like a smart idea to purchase an electric vehicle right now given all the changes to the EV tax credit. However, bear in mind that several benefits, such as the removal of manufacturer limitations and the application of the credit at the time of sale, won't take effect until 2024 or the next year.

Even though this modification to the tax incentives will make the already difficult to navigate EV market much more complicated in the immediate term, in the long term it will be great news for customers, especially middle-class mainstream consumers who later on can purchase more affordable EVs.

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Elon to Switch to the Cybertruck; Volume Production in 2024

Cybertruck mass production to start in 2024

Kim Java

Tesla's fourth quarter and 2022 earnings call with investors was mostly good news unless you were planning to drive a Cybertruck soon. While company executives eagerly jumped on every question asked by investors, there was a noticeable pause when a point-blank question was asked about Cybertruck's mid-year production date.

Elon Musk responded "um, we do expect production to start, I don't know, maybe sometime this summer. But I always like to try to downplay the start of production because the start of production is always very slow. It increases exponentially, but it's always very slow at first. So I wouldn't put too much thought in start of production."

Volume Production Next Year

If the millions of people with Cybertruck reservations were in attendance, you might have felt the air leave the room. The previous belief was mass production would start by the end of 2023. There may be some stainless-steel beauties on the road by then, but only a few. "It's kind of when does volume production actually happen, and that's next year," said Musk.

Perhaps sensing some disappointed buyers, Lars Moravy, Tesla's Vice President of Vehicle Engineering added, "(I'd) like just to emphasize on that, we've started installation of all the production equipment here in Giga Texas, castings, general assembly, body shops. We built all our beta vehicles, some more coming still in the next month, but as you said, the ramp will really come 2024."

The Cybertruck Will be Elon's Next Car

Cybertruck was originally announced in 2019 at the memorable event that included the unbreakable armor glass smashing. Musk was wearing the smashed glass Cybertruck t-shirt while taking questions from investors. While the wait continues, he is adamant that it will be worth it, "So it's an incredible product. I can't wait to drive it personally. It will be the car that I drive every day… it's just one of those products that only comes along once in a while, and it's really special."

The original release deadline was set for 2021. However, the production date has been delayed due to unforeseen circumstances, like a global pandemic. Nevertheless, it is a positive sign that beta vehicles have been produced. Images of what appears to be a Cybertruck were leaked a few months ago.

Recently, chief designer Franz von Holzhausen did confirm that the Cybertruck was ready for production, but it's a work in progress. Every Tesla beta product gets thoroughly examined and meticulously reviewed before the next step. But at least it's a step in the right direction.

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A Look at Tesla's 2022 Numbers and Record Quarter

Tesla set new records in production and deliveries while beating analyst expectations.

Statista

Tesla published their Q4 2022 and full-year financial results, setting new records in production and deliveries while beating analyst expectations. Tesla’s annual profit rose to $12.6 billion in 2022, from $5.5 billion in 2021. Annual revenue rose to $81.5 billion, from $53.8 billion the year prior. Tesla reported fourth-quarter revenue of $24.32 billion beating analysts' $24.07 billion estimate. The automaker also reported earnings per share of $1.19 beating analysts' $1.12 estimate.

Tesla’s stock rose more than 5% in after-hours trading following the earnings release and surged more than 10% the next day.

Tesla's Q4 2022 revenue set a new record for the company, up 59% from a year earlier. In addition to automotive revenue of $21.3 billion, Tesla recognized $324 million of deferred revenue from the company’s driver assistance systems.

FSD Beta Numbers

Tesla reported that 90 million miles have now been driven with FSD Beta, up from 58 million miles in the previous quarter. The company also confirmed that they have about 400,000 FSD Beta users in North America, a sizeable increase since the last report. With such a steep increase in miles driven and FSD Beta becoming widely available in North America, Tesla is making significant progress with its autonomous driving software.

In late 2022 and into this year, Tesla began cutting prices on its cars globally. Elon spoke about how recent price cuts have fueled a surge in demand for Tesla: “Thus far in January we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.” He added: “These price changes really make a difference for the average consumer.” Tesla acknowledges that average sales prices have to decrease over time because affordability is part of Tesla's mission to grow into a company that sells multiple millions of cars annually.

Price cuts will impact profitability, but margins should remain healthy, Tesla CFO Zach Kirkhorn affirmed. Tesla has wider operating margins than the industry average, which allows them to make such price cuts.

Elon issued an uncertain forecast for 2023, saying Tesla planned on 1.8 million vehicles for the year without specifying whether that was a target for production or deliveries. If the company were to deliver 1.8 million vehicles in 2023, that would result in 37% annual growth.

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