GM and Tesla EVs are Closing in on Maximum Number of Tax Credits

Will manufacturer see sales decreases once the government incentive is gone?

Bloomberg via Getty Images

There's one huge number that all companies currently producing electrified cars need to be worried about: 200,000. That's how many electric cars the manufacturer can sell in the United States before the government begins to dismantle the tax credit available for new EV adopters for that particular brand. Two automakers in particular are quickly closing in on that figure and are predicted to reach it as soon as mid-2018, but how that will affect sales of EVs is still up in the air.

According to the latest EV sales numbers reported by Tesla and GM, the two electrified giants are doing battle for the top of the sales chart. Though it may seem like a great feat to reach the top run of the ladder first, it's really a double-edge sword. Whoever reaches the famed number first will have put the most cars out on the road in the shortest amount of time, but they will also soon lose one of the biggest sales incentives that doesn't cost them a single penny.

Early adopters of EVs in the Untied States are gifted a tax credit of up to $7,500 by the IRS, depending on the size of the vehicle's battery and other factors. This credit became available in 2011 as a push for the United States to be the first nation to have 1,000,000 electric cars on the road by 2015, though the U.S. only met less than 50% of this goal by the end of the time frame. With the kickback to consumers and the increased incentive to purchase an electrified vehicle, the government program looked to trickle money into manufacturers for increased research and development in order to improve the nation's selection of electrified options.

As of October 2017, GM is leading with 158,257 sales and Tesla is following closely behind with 148,145 (an estimate based on geographic market, as this number is not disclosed by the manufacturer). Once a manufacturer actually reaches 200,000 sales in the United States, the $7,500 tax credit is slashed in half several times until it is ultimately eliminated. It is hoped that by the time the tax credit is eliminated, the manufacturer would have been able to decrease pricing enough to make up for the credit, still providing a financial incentive to prospective buyers, though many believe that this will not be the case.

Earlier this month, the government attempted to unsuccessfully dismantle the EV tax credit which was met with an unlikely alliance of opposition from both consumers and companies alike. Despite earlier comments from GM regarding the industry's ability to succeed even without government incentives, the two factions fought side-by-side to show just why the tax credit is important to amping up the national infrastructure for the inevitable push of electrified cars.

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