The GOP tax bill kills a $7,500 electric-vehicle credit — and that’s terrible news for Tesla

The Tesla Model x.

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The Tesla Model x.
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Tesla

    The GOP tax bill eliminates a $7,500 federal electric-vehicle tax credit. The credit would go away immediately, not be phased out. The credit has been seen as a major driver of EV sales.

The just-unveiled Republican tax bill will eliminate a $7,500 federal tax credit for electric vehicles, and that would be Terrible news for Tesla. Shares of the automaker, already down after its earnings report, fell sharply on the news. The credit was already capped at 200,00 units – a limit Tesla would eventually have hit once its Model 3 was in full production. But Tesla does include the tax credit in pricing calculations for new vehicles on its website, enabling customers to compare the total vehicle cost with and without the federal tax break. (The credit can only be claimed if a customer owes money to the IRS.) Bloomberg’s Craig Trudell wrote Thursday that Tesla has sold about 127,000 Model S sedans and Model X sport utility vehicles through August, citing researcher IHS Markit.

Tesla shares fell 8% to $296 in morning trading.

The Chevy Bolt.

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The Chevy Bolt.
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Hollis Johnson

“The provision repealing qualified plug-in electric drive motor vehicles would be effective for vehicles placed in service for tax years beginning after 2017,” the Republican bill states. The change is estimated to increase tax revenues by about $4 billion.

The GOP bill doesn’t affect various state tax breaks and incentives that apply to electric cars.

General Motors would also face the loss of the tax credit on its Chevy Bolt, an all-electric vehicle that launched in late 2016, and that has sold in far lower volumes so far than Tesla’s cars.

With so few EVs sold annually, the boost to federal revenue if the credit goes away would be marginal. However, the tax break has been seen as a major driver for EV sales. Screen Shot 2017 11 02 at 12.31.20 PM

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Markets Insider