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Elon Tweets Model 3 Production Ramp up


Federal EV Tax Credit Phaseout Quarter For Tesla Becoming More Clear (Sort Of)

With Elon Musk’s mini-tweetstorm Sunday night, July 2, several things became more clear (sort of) in the world of electric vehicles (EVs).

We can now estimate Model 3 production for the rest of 2017 — which also gets us closer to a reasonably accurate estimate of when Tesla will reach 200,000 units delivered in the US.

With Elon Musk’s mini-tweetstorm Sunday night, July 2, several things became more clear (sort of) in the world of electric vehicles (EVs).

We can now estimate Model 3 production for the rest of 2017 — which also gets us closer to a reasonably accurate estimate of when Tesla will reach 200,000 units delivered in the US.

Elon Tweets Model 3 Production Ramp up

As Steve Hanley shared in his article, “Hot News! Tesla Model 3 Production To Begin Friday, July 7,” Model 3 production is slated to begin with 30 units in July and end 2017 with a run rate of 20,000 per month in December. And while Elon Musk’s tweets also suggested 100 Model 3s will be produced in August, followed by 1,500 in September, we are left to fill in our own spreadsheet cells for October and November.

Tesla Model 3 Production Ramp-Up Scenarios

Per my chart above, I’ve created three scenarios of a production ramp up for the Model 3:

  • Elon Tweets: This is taking Elon at his word and doing a simple extrapolation to 5,000 and 10,000 units for October and November respectively.
  • Historical Realist: This scenario is based on Tesla’s history of often missing promised targets and the realities of scaling production of a brand new car on a new assembly line.
  • Bearish: This scenario is written to appease some of the contributors to the Seeking Alpha site who don’t believe anything Elon promises.

The reality, of course, is we won’t know what Model 3 production is until sometime in early 2018 when the numbers are reported. But until then, we can have fun speculating and use these projections to then update forecasts for when the federal EV tax credit would start to phase out for Tesla buyers.

In my January 20, 2017, CleanTechnica article “Predicting When US Federal EV Tax Credit Will Expire For Tesla Buyers,” I created four possible scenarios for when Tesla might reach 200,000 units sold in the US. Now that we have six months of sales in 2017  (actual and estimated) for the Models S and X and Elon’s Model 3 guesstimates, it is time to update the forecasts.

To keep the models reasonably simple, I’m assuming a slight decline going forward in sales for both Models S and X. This is based on the assumption that some potential buyers of the Model S in particular may either choose to wait for their Model 3 reservation or pick up a used Model S or X at a steep discount compared to new models. Regardless, if Model S and X sales are either higher or lower than my assumption, it isn’t likely to affect in which quarter sales reach 200,000.

Tesla US Model 3 Deliveries Estimate - Scenario 1

Tesla US Model 3 Deliveries Estimate - Scenario 2

Tesla US Model 3 Deliveries Estimate - Scenario 3

Using the three scenarios I created in the tables above, I’ve extrapolated and projected in which quarter Tesla would pass 200,000 units delivered. In both scenarios #1 and #2, Tesla would pass 200,000 units in quarter 1 of 2018. In scenario #3, Tesla would pass 200,000 units in quarter 2 of 2018.

One of these scenarios is likely to become close to reality, but remember that anything could happen to throw off production. Tesla could have an issue with a key supplier, battery-pack production at the Sparks (Nevada) Gigafactory might not ramp up as needed, one or more of the production-line robots could be faulty, or something completely unexpected could occur, such as factory workers deciding to go on strike.

But those and other possibilities aside, the earliest it appears that Tesla would reach the 200,000 mark is in Q1 of 2018 and the latest is likely Q2 of 2018. If production ramped up significantly less than even scenario 3, then reaching 200,000 deliveries could potentially be delayed out until Q3 2018.

Below is an updated table on the potential federal EV tax credit phaseout for Tesla, incorporating my updated production/delivery scenarios.

Federal EV Tax Credit Scenarios for Tesla-updated

Reminder: How the Federal Tax Credit Phaseout Works

The federal tax credit is phased out over time beginning the second quarter after the quarter in which a manufacturer reaches a total of 200,000 BEV and/or PHEV vehicles sold since 2010. Here’s how the phaseout works:

  • The full amount of the EV qualifying tax credit is in place during the entire calendar quarter in which 200,000 EVs are sold by a manufacturer, and through the subsequent quarter.
  • Then the tax credit amount is reduced by 50% ($3,750 for Tesla models) for the next 2 quarters.
  • The credit is reduced again to 25% ($1,875 for Tesla models) of the original amount for the subsequent 2 quarters.
  • At that point the credit expires completely.

So What Does This All Mean?

If you are a Model 3 reservation holder living in the US and your completed purchase doesn‘t happen by either Q2 or Q3 of 2018, you most likely won’t be able to take advantage of the full $7,500 tax credit. But you will still have several more quarters to take advantage of the reduced tax credit amounts of $3,750 or $1,875.

Because there are so many factors involved, including where you live and if you are already own a Tesla, it is hard to predict based on your reservation date or number when you will be able to configure your Model 3 — though, here is a delivery estimator from Teslanomics. If we assume that roughly 250,000 of the current reservation holders live in the US, it seems likely that all current US reservation holders would qualify for at least one of the three levels of the tax credit.

One final reminder: The tax credit is only available to the buyer if the EV is purchased. If you lease an EV, the lessor receives the benefit of the tax credit, but typically reduces your monthly lease payment by a corresponding amount.

Additional Resources on the Tax Credit:

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Written By

Loren writes about the factors driving adoption of electric vehicles and the opportunities and challenges the transition to EVs presents companies and entrepreneurs in the auto, utility, energy, retail and other industries. He provides market analysis, consulting, and marketing services to companies in the EV and EV charging industry. His research and analysis are published on CleanTechnica and his website.


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