To many, this quarter seems no different. Tesla is once again pushing sales as they do every 3 months to keep investors happy. They beef up their numbers by providing false deadlines, discounts, or even free trials. There is one major difference separating this quarter from the rest: the Tesla tax credit phase out.
Update (12/16):We reached out to Tesla for comment regarding when the consumer qualifies for the full EV tax credit. Tesla had stated that “Customers must take delivery of their car by or on December 31st in order to receive the $7,500 credit.” which can be found written in their blog post from August. Hopefully this can clear up any misconceptions any of us might have had regarding the tax credit and the IRS statement. The post below was made on assumptions and speculation. We now have a full understanding of the situation. You can read Tesla’s full statement here.
The phase out will begin on January 1st, 2019 and Tesla has made it blatantly obvious they’re trying to give as many people the opportunity to claim the full $7,500 Tesla tax credit as possible. But is that actually what they’re doing, or is this just a sales tactic that will, for lack of better words, screw people over?
|Federal Tax Credit||Period|
|$7,500||On or before December 31, 2018|
|$3,750||January 1 to June 30, 2019|
|$1,875||July 1 to December 31, 2019|
Recently the IRS released a statement in which they clarified what will qualify for the full $7,500 tax credit.
Furthermore, Section 1 of the Notice states, “[t]his notice also amplifies Notice 2009-54 and Notice 2009-58, 2009-30 I.R.B. 163 (relating to the plug-in electric vehicle credit under § 30) to provide that a vehicle is considered “acquired” when title to that vehicle passes under state law.” Specifically, Section 4.07 of the Notice provides that “[a] vehicle is not “acquired” before the date on which title to that vehicle passes under state law.”
To simplify this, a car is not considered sold until the title is issued. If you’ve previously bought a Tesla or really any car, you should know where I’m going with this.
Titles are not handed over instantaneously. They go through a “process” and are often delayed. Tesla is notorious for having a lengthy gap between purchase and title. Some taking just days, others taking months with multiple temporary tags. In this theory, if you have a temporary tag on your car, your car is not yet titled. But Tesla is still pushing sales up until the very end.
Tesla is releasing all vehicles for sale today where original customer can’t take delivery before end of year.
Reminder to US buyers that $7500 tax credit drops in half in 2 weeks. Order online https://t.co/46TXqRrsdr or visit stores.
— Elon Musk (@elonmusk) December 15, 2018
Tesla has always pushed sales at the end of the quarter, this isn’t anything new. They’ve threatened that it was the last opportunity to get free supercharging more times than you could imagine. They’ve offered multiple Autopilot free trials and discounts to push for profits. Now they are even providing free upgrades if your order is not available in inventory just to get your car delivered before this deadline. But if this is to be understood, any Tesla with a temporary tag will not qualify for the full $7,500 rebate and yet Tesla is saying they will as long as they take delivery by the 31st of December. Previous pushes for numbers have never directly resulted in such gross consumer mismanagement.
This could all simply be a misunderstanding of the legal jargon and mean absolutely nothing. But if it does fall this way, I truly hope Tesla isn’t knowingly advertising a $7,500 rebate for customers they know won’t qualify.
And then there’s the second argument which basically has the roles reversed. The “Elon is lying” argument. Basically stating a vehicle is counted when the purchase is finalized and the manufacturer has built the vehicle (IE assigned a VIN). So any car simply ordered by the 31st of December will qualify even if delivered next year. The theory here is that Elon is just throwing it all into this end-of-year push to get as many cars sold before the books close. Lying about deadlines to push for end-of-quarter sales is nothing new to Tesla. The end of Q3 was supposedly the deadline to guarantee your delivery before the end of this year guaranteeing you the full $7,500 Tesla tax credit. Yet here we are at the end of Q4.
Under Notice 2009-89, 2009-26 C.B. 1124, vehicles are acquired when title passes as determined by state law. Title passage rules fall within the state’s commercial law. All states have adopted some version of the Uniform Commercial Code (U.C.C.) However, Louisiana is the only state which has not adopted Article 2 covering the sale of goods and adopted its own civil law that governs the sale of goods.
We reached out to someone in the auto sales industry for some thoughts and clarification.
“As with everything car sales, this is a state by state basis. When you pick up your car, there is a bill of sale. The IRS could use that but if they want to specify the title then it’s a different story. Typically it takes dealers upwards of 3 weeks to send your title for a transfer. If they really wanted to, they could do it right away. Typically there’s no rush but in this case it can be done and sent in as little as 10 minutes after delivery. No, you won’t take possession of the title, but it is indeed issued and transferred. You stay with a 30 day temp tag until your title is received through mail to you or your lien holder.“
If this is the case nationwide, then Tesla is right in stating all you have to do is take delivery before the 31st, assuming they rush the titles. But as stated, this is a state by state basis. In Texas for example, you have to fully pay, register, and sign for your car before it’s delivered. So in theory, you’d be able to place your order on the 31st and still receive the full credit even if delivered next year.
So there’s three different theories on the matter leading to three very different results. I’d like to assume the last one is correct and Tesla knows what they’re doing but honestly, they don’t have the best track record. Could this potentially screw people over? Are you forced into ordering this year if you want the full rebate? We don’t really have any answers from the statements made, just more confusion. If you have anything to add, we’d love to hear it.