Money & The Economy

Dems Toss Lifeline to Tesla as Musk Melts Down


by Chris White

Democrats are working to rescue Tesla as the company struggles to cope with the possibility of losing a lucrative tax credit many analysts argue is the only thing keeping the electric vehicle industry afloat.

Democrats are pushing to extend the breaks, while Republicans paint the subsidy and attempts to solidify it as unnecessary. Electric vehicle companies are only allowed to offer a federal tax break on their first 200,000 vehicles sold under a 2009 law.

“It’s crazy that we might allow the electric vehicle tax credit to run out just as the American electric vehicle market is starting to gain a foothold,” Sen. Jeff Merkley told The Hill Thursday. The Oregon Democrat is leading a group of senators who introduced a bill on Sept. 17 lifting the cap.

Merkley’s bill is receiving support from many big-name Senate Democrats. Democratic Sens. Corey Booker of New Jersey and Kamala Harris of California, for instance, are tossing their weight behind the Electric Cars Act of 2018. Republicans are taking a different tack.

“I wouldn’t be supportive of any legislation to extend the credits,” Republican Sen. Pat Toomey of Pennsylvania told reporters. “The government shouldn’t be interfering in people’s choices of vehicles based on the merits.”

He added: “It shouldn’t be subsidizing one category of products at the expense of others.”

The bill could be a significant boon for Tesla, which has already delivered 200,000 vehicles, meaning the automaker will likely begin running out of the tax credits necessary to keep the electric vehicle market alive.

Tax credits for Tesla’s major vehicles will now be reduced 50 percent every six months until it is completely phased out. The change gives rivals such as Mercedes-Benz, BMW AG and Audi AG the upper hand, as they bring electric models to the market with a full tax credit in place. The $7,500 tax credit will drop starting on Jan. 1, 2019 to $3,750 around mid-year, according to Tesla’s website. GM is entering a similar stage — it is expected to hit the 200,000 vehicle point with sales of its Chevrolet Bolt EV, among other vehicles.

Data show the elimination of the subsidy could be a possible death knell for Tesla, especially considering the company’s inability to mass produce vehicles at the scale of its larger competitors.

A data analysis conducted by The Wall Street Journal in July 2017 shows there were no new Tesla Model S sedans and Model X SUVs registered in Hong Kong in April 2017 after that region revoked the tax credit. There were 2,939 Tesla vehicles registered in March of that year before the April 1 redaction of the credit, and nearly 3,700 entering the Transportation Department’s books for the first quarter of 2017.

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