Will GM or Tesla buyers lose electric-car tax credits first?

2017 Chevrolet Bolt EV 3.jpg
2017 Chevrolet Bolt EV (Sinclair Broadcast Group / Jill Ciminillo)

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.

DON'T MISS: When do electric-car tax credits expire? (further update) (Mar 2016)

With six 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 within the next couple of years.

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.

The 238-mile, $37,495 Chevrolet Bolt EV went on sale in December in certain states, and Tesla just confirmed that it plans to deliver the first examples of its 215-mile, $35,000 Model 3 in the second half of this year.

The Silicon Valley automaker's confirmation of its Model 3 launch timing came in its most recent shareholder letter, released yesterday.

It prompted a prediction that Tesla would be the first to hit 200,000 electric-car sales, published by Plugless, a wireless-charging system for electric cars.

ALSO SEE: When Federal Electric-Car Tax Credit Ends, Nissan Will Be Ready, Exec Says (Feb 2015)

In the letter to shareholders, Tesla said it expected to boost production to 5,000 cars a week by the end of 2017, and to 10,000 cars a week sometime next 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 in the running to reach 200,000 sales before GM.

The Detroit automaker delivered its 100,000th Chevrolet Volt on August 1, 2016.

Sales of the now-discontinued Chevy Spark EV (totaling 7,400) and Cadillac ELR (about 3,000) likely put its total plug-in car sales over 100,000 units earlier still.

GM hasn't discussed detailed sales targets or production volumes for the Bolt EV, deliveries of which won't be underway in all 50 states until September.

MORE: IRS Electric-Car Tax Credits: Reporting Discrepancies Remain (Feb 2015)

But the Bolt EV is expected to boost GM's plug-in car sales significantly, along with continuing sales of the Volt plug-in hybrid. (The upcoming Cadillac CT6 plug-in hybrid is likely to contribute less than 1,000 U.S. sales a year.)

GM has sold 126,740 electric cars and plug-in hybrids in the U.S. through January of this year.

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.

A second-generation Leaf with a range comparable to the Bolt EV and Model 3 almost surely won't arrive in time to keep Nissan in the race to 200,000.

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 next year, at the earliest.

At that point, Tesla will be close to triggering a tax-credit phaseout, if it hasn't already.

[hat tip: Raymond Cooper]


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