A major contributor to electric-car sales is the program under which buyers of new electric cars qualify for a federal income-tax credit of up to $7,500.
But these tax credits are not unlimited.
Once a manufacturer reaches sales of 200,000 plug-in electric cars (after December 31, 2009), the credits start to phase out for that company’s cars.
With seven years of electric-car sales and long-range, mass-market models on the way that will appeal to a broader range of buyers, it’s likely that at least one automaker will hit the limit by the end of this year.
The two most likely candidates are General Motors and Tesla.
Both have already sold a large number of battery-electric and plug-in hybrid cars—and both will soon have models with at least 200 miles of range priced below $40,000.
EDITOR’S NOTE: We originally published this article a year ago, in February 2017. We have updated it with sales information as of the end of last year.
The 238-mile, $37,495 Chevrolet Bolt EV went on sale in December 2016 in certain states, and Tesla delivered the first examples of its Model 3 in July, though total deliveries through December 2017 were less than 2,000 units.
The Silicon Valley automaker’s Model 3 launch had long prompted predictions that Tesla would be the first to hit 200,000 electric-car sales, including one published by Plugless, a wireless-charging system for electric cars.
And indeed that appears to be the case.
ALSO SEE: When Federal Electric-Car Tax Credit Ends, Nissan Will Be Ready, Exec Says (Feb 2015)
As of February 2018, Tesla said it expected to boost production to 5,000 cars a week by the end of June 2018—delayed by six months from the July 2017 goal of the end of the last year—and to 10,000 cars a week by the end of the year.
Both figures represent production for all markets, including cars for export that are not counted toward the tax-credit totals for U.S.-market cars.
Tesla does not report monthly sales figures or break down its quarterly totals by country, but those rates plus estimates of its U.S. registrations put the company ahead of GM to reach 200,000 sales.
Tesla Model 3 design prototype – reveal event – March 2016
The Detroit automaker delivered its 100,000th Chevrolet Volt on August 1, 2016.
Through December 2017, GM had sold 168,183 plug-in cars—Chevy Volts, Spark EVs, and Bolt EVs, plus Cadillac ELRs and CT6 PHEVs.
GM hasn’t discussed detailed sales targets or production volumes for the Bolt EV, which became available in all 50 states last August and sold 2,000 to 3,200 units in the last six months of 2017.
While Tesla doesn’t break out its sales by market, its U.S. sales were likely about 160,000 to 165,000 electric cars.
The only other automaker that may reach the credit limit in the near future is Nissan, although it is moving at a somewhat slower pace than GM or Tesla.
Nissan sold 114,825 Leafs through last December. The second generation Leaf is now reaching dealers, and it’s expected to do better than the last few years of the aged first-generation car.
Once an automaker reaches 200,000 sales, the credits start to phase out over a one-year period beginning in the second quarter after that total is reached.
For two quarters, the credit is halved; for a third quarter, it is set at 25 percent of the original amount. After that, it disappears.
It’s something to keep in mind when shopping for an electric car, or joining the long line of reservations for the Model 3.
Many U.S. reservation holders likely won’t take delivery of their cars until late this year, at the earliest—especially those waiting for all-wheel-drive versions or the smaller of the two battery packs, the one with the $35,000 base price.
By that point, Tesla will be close to triggering a tax-credit phaseout, if it hasn’t already.
[hat tip: Raymond Cooper]