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Well folks, it’s official: Tesla has now sold and delivered more than 200,000 electric vehicles here in the US. That’s an important milestone for the EV maker because it means that the $7,500 IRS tax credit that buyers have been eligible for will soon be a thing of the past.

Speculation that Tesla had hit the 200,000 mark for US sales has been rampant, particularly in the wake of the company’s recent statement regarding production numbers. In the second quarter of 2018, it says it produced 53,339 vehicles, a 55 percent increase over Q1 2018. That big increase was in large part down to the company finally finding its feet with regard to the Model 3 production lines. More than half its Q2 output (28,571 cars) were Model 3s; the remainder were Model S and Model X EVs.

However, it was unclear at the time of Tesla’s announcement just how many of those cars were actually bound for US customers. In the past, Tesla has often focused one month a quarter on delivering vehicles to countries outside of the US, and it was thought likely that the company was doing everything possible to ensure it didn’t break the 200,000 US sales mark before the end of Q2. But on Thursday morning, the company updated the page on its website dealing with EV incentives in light of reaching this milestone.

Now, the IRS tax credit doesn’t just disappear overnight. If you buy a new Tesla that is delivered before the end of 2018, it will still be eligible for the full $7,500 credit—assuming you have at least $7,500 in federal tax liabilities. For the first six months of 2019, new Teslas will be eligible for a tax credit of $3,750; for the final half of 2019, that drops to just $1,875. Any new Tesla delivered in 2020 and beyond will be ineligible for the federal tax credit.

In some ways, the slow ramp-up of Model 3 production actually helped Tesla out here. If things had gone swimmingly and the company was able to meet Elon Musk’s original claims for production volume, the 200,000 cap would surely have been reached much sooner. And now that the IRS incentive for Teslas is simply time limited and not based on number of cars delivered, any increased production in Q3 or Q4 2018 just means more Tesla customers who will be able to benefit from the full incentive.

Electric car sales are very sensitive to incentives

While it’s great for Tesla that it has managed to sell so many electric cars in the US, the end of the incentive is probably not the best thing in the world. Although 17.2 million new cars and light trucks were sold in the US in 2017, only 200,000 of those were EVs. Plus, the data is unequivocal: incentives drive EV sales, and EV sales dry up when incentives go away.

As the Tesla incentive webpage notes, the IRS federal tax credit is not the only game in town: 13 states plus the District of Columbia have added rebates or incentives for EV adopters. However, on the Tesla subreddit, posters on Thursday morning noted that the California and Massachusetts EV tax rebate funds are also almost exhausted.



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