A key government perk for Tesla buyers is running out, says Edmunds

Key Points
  • Tesla's federal tax credits are dwindling
  • Tesla is selling its first Model 3 cars to employees
A key government perk for Tesla buyers is running out, says Edmunds

A key government incentive benefiting Tesla buyers is dwindling, according to Edmunds.

The online automotive research site estimates Tesla has only about 79,000 federal tax credits left, and says this could be a concern for new buyers, especially those interested in the company's lower priced Model 3.

The U.S. government offers a tax credit for electric vehicle purchases amounting to $7,500. The credit begins to phase out once a manufacturer has sold 200,000 vehicles, of any model.

Edmunds estimates Tesla has sold about 121,000 cars since the rebate took effect in 2010. The credit will halve in the first two quarters of the phase-out period, and then halve again in the two quarters after that, before disappearing entirely.

Tesla's production numbers have climbed dramatically over the last few years, from just roughly 2,400 cars in 2012 to almost 80,000 in 2016. Throughout that time, Tesla buyers have been able to redeem both the federal credit and, in many cases, state incentives as well.

These credits may not make that much of a difference for buyers of Tesla's high-end cars, which run just over $140,000. But the incentive is one-fifth the price of the much cheaper Model 3, which starts at $35,000.

Elon Musk shows off the first Tesla Model 3 from assembly line

The ticking clock might be a concern for some of the roughly 400,000 Model 3 reservation holders, who may be counting on redeeming the incentive, as Tesla hands out its first Model 3 cars to 30 employees on Friday, said Edmunds executive director of industry analysis, Jessica Caldwell.

The electric car maker has said before it is selling its earliest Model 3 cars to employees, in part for quality control and troubleshooting purposes.

"The uncertainty of tax rebates is still a big concern for Tesla reservation holders," Caldwell said in a report sent to CNBC. "Tesla appears to be prioritizing employees, investors and current Tesla owners for delivery of the Model 3, all while the company continues to sell the Model S and Model X, which will eat into Tesla's dwindling tax credits. It's still a big question whether the thousands of people in line to buy a Model 3 will be able to stomach the full price of the car without a hefty rebate."

Tesla was not immediately available for comment.

There will, of course, still be state-level credits and other perks in some states, particularly California, where Tesla is based. For now, governments around the world are still leaning toward supporting electric vehicle adoption.

"Public policy, for the most part, is on the side of Tesla's mass-market vision," Caldwell said. "Bans of gas and diesel vehicles in Europe are on the distant horizon, and although U.S. Federal tax credits may not be extended by the current administration, California has proposed its own incentive program that carries a lot of weight considering more than half of electric vehicles are sold there."

It is also worth noting that Tesla is not the automaker with the largest number of federal tax credits redeemed, according to Edmunds. General Motors holds that title, with almost 143,000 qualifying electric vehicles sold, most of which are plug-in hybrids.

GM began selling its first all-electric car, the Chevrolet Bolt, in California in December 2016, and plans to roll it out in every state by August.

Tesla shares were up roughly 1 percent Friday afternoon, trading around $337.

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