Republican Tax Bill Slashes Electric Car Subsidy To $0 From $7500

According to Bloomberg, the Republican's current take on tax reform includes ditching an electric car credit that served to sweeten the deal of going green for many Americans. (Image credit: YouTube)

After the House Ways and Means Committee introduced its tax bill, Bloomberg reported on a provision that sent Tesla's share prices tumbling - Republicans are seeking to cancel the $7,500 subsidy available to those purchasing electric cars.

The proposed repeal poses risk to the more mainstream consumers Chief Executive Officer Elon Musk’s is pursuing with the Model 3 sedan, which starts at $35,000.

The credit began January 2010, and though it was not intended to last forever, it has not yet reached its quota:

Since the start of 2010, the EV tax credit has been $2,500 for a plug-in vehicle with at least 5kWh battery capacity. Every extra kWh nets another $417 up to a maximum of $7,500, although you would need at least that amount in income tax liability—the IRS won't cut you a check to make up the full amount. It was never meant to be permanent; once an automaker sells 200,000 qualifying vehicles (starting from January 1, 2010) its eligibility is phased out over a matter of months.

Tesla is first in line to reach the 200,000 car limit, but with recent setbacks in production of its Model 3, the possible end to government-led incentives will be less than helpful.

It’ll be “interesting to see churn on the deposit base of Model 3 holders, especially as the timing to receive the car is elongated,” Jeffrey Osborne, a Cowen & Co. analyst, wrote in a note to clients. “What does time and the lack of a tax credit do to demand elasticity?”