[njarboe]

The way the tax credit works is that a car company's customers get $7500 US tax credit for the first 200k Tesla type electric cars. Then begins the phase out. First the $7500 tax credit remains for the rest of the quarter when the 200k US sales was hit and the following quarter (so between 3 and 6 months). Then the tax credit goes in half for 2 quarters and then 1/4 the original for another 2 quarters. Seems strange to have a variable length phase out on the full amount but maybe the people who wrote the bill couldn't envision a company selling so many cars in a quarter that when in the quarter the company passed the 200k marker would be something the company would focus on.

Tesla is near the 200k mark and has been holding back domestic sales so to hit it at the beginning of a quarter (i.e now).

Edit: Here is a link to the official explanation of the credit in glorious IRS legalese (https://www.irs.gov/irb/2009-48_IRB#NOT-2009-89).

Relevant quote from the IRS to this discussion:

"The new qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period."

[notlob]

> > > They timed production to maximize federal tax credits for US consumers.

This is what is confusing me: if the credits are timed to domestic sales (so international sales don’t affect the timing of the tax credit phase out) what does this have to do with production?

[njarboe]

If timed right, they have 6 months to sell cars after the 200k cutoff. Some people say they have been storing some cars and not selling them along with selling more overseas so that all the cars produced (and sold, but with the reservation backlog, this is the same thing for now) for the next six months can get the tax credit. It has to do with production because you can't have sales of cars that don't exist.

[toomuchtodo]

> It has to do with production because you can’t have sales of cars that don’t exist

Rather, you don’t want to rush to produce vehicles you don’t want to deliver quite yet. You want to get to maximum output at the same time the timer starts on federal tax credits phasing out (which, keep in mind, would’ve happened without Model 3 production due to 2k/week Model S and X production).

[andromeduck]

It doesn't.