Tesla’s car deliveries in the second quarter of the year have reached a record high, thanks to federal tax credits for electric vehicles in the US. Surpassing its own prediction, Elon Musk’s company delivered 446,140 cars worldwide between April and June, indicating an impressive 83% increase from the same period last year when production was limited due to COVID-19 restrictions in China. This news has also positively affected Tesla’s stocks, which have risen over 7% as of Monday morning. The boost in sales can be attributed to the federal tax cut on electric cars implemented by the government in April, aimed at accelerating America’s transition away from gas-powered vehicles.
Under this scheme, motorists can receive up to $7,500 in tax credits when purchasing environmentally friendly vehicles. However, only ten models, including plug-in hybrids, qualify for the full amount, while an additional seven models are eligible for $3,750 in credits. Notably, the Tesla Model 3 and Model Y, priced between approximately $41,990 and $56,990, are among those that qualify for the full discount. As a result, a Tesla Model 3 is now more affordable than a Toyota Camry in California, with the former starting at $40,240 after the rebate and other state tax incentives, compared to the latter’s listing price of $26,320 or higher.
The Model 3 and Model Y were responsible for nearly all of Tesla’s sales in the second quarter, totaling 446,915 vehicles. These impressive figures provide a much-needed boost for Musk, who has faced criticism for imposing restrictions on Twitter. In an effort to increase sales, Tesla has implemented an aggressive price-cutting campaign since the beginning of the year, attracting new customers with incentives such as three months of free fast charging in the US and insurance-related subsidies in China.
Ben Kallo, an analyst at wealth management firm R.W. Baird, commends Tesla’s strategy, stating, “It’s a big beat. People were still anticipating further price cuts, and this significant delivery number reduces that risk.” This strategy has proven successful as Tesla continues to prioritize its goal of increasing sales throughout the year.
The federal tax cut on electric vehicles was introduced by the Treasury as part of its Inflation Reduction Act, aiming to make electric cars more affordable for the average consumer. However, the qualifying criteria for the tax credit are complex, requiring a certain percentage of battery parts to come from the US to be eligible for the full $7,500 rebate. As a result, only ten out of the 49 electric vehicle models available nationwide meet these requirements.
Interestingly, a legal loophole has emerged where many drivers are choosing to lease electric vehicles to qualify for the tax credit. Leased electric cars are classified as “commercial” vehicles under the rules, exempting them from the qualification criteria. This has led to a rise in electric vehicle leases, accounting for 41% of all electric vehicle deliveries in April, four times the amount in December.
Overall, Tesla’s record-breaking car deliveries, driven by federal tax credits and aggressive pricing strategies, showcase the company’s dominance in the electric vehicle market while contributing to America’s transition towards sustainable transportation.
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