Buying a new electric car feels good, both for your conscience and for your wallet. But for how long?
When a consumer purchases a new electric model, he or she is eligible for a federal IRS tax credit for $2,500 to $7,500 per new car based on the size of the vehicle and its battery capacity, according to the Office of Energy Efficiency & Renewable Energy.
For example, a Tesla Inc. (TSLA) - Get Report model made from 2012 through 2017 is eligible for a $7,500 credit as an electric vehicle. A Ford Motor Co. (F) - Get Report 2013-2018 Ford Fusion Energi gets a $4,007 credit as a PHEV plug-in hybrid. A plug-in Porsche Automobil Holding SE (POAHF) 2015 918 Spyder gets a $3,667 credit.
But all of those tax credits are only available until 200,000 qualified electric vehicles have been sold in the U.S. by each manufacturer. At that point, the credit starts shrinking for that specific carmaker.
According to the Department of Energy, the tax credit begins to phase out at the beginning of the second calendar quarter after the manufacturer has sold 200,000 EVs as counted from Jan. 1, 2010. The IRS monitors sales and will make an announcement when a carmaker reaches the threshold.
Consider this example: say a carmaker hit 200,000 EVs in February 2017. For the rest of the first quarter of 2017 and the entire second quarter of 2017, buyers get the full tax credit. For the next six months, buyers get half the tax credit. And for the next six months after that, buyers get 25% of the full credit. After that, the credit is fully abolished.
But as of now, no manufacturers have met the 200,000 mark. It's not hard to see the increasing popularity of greener, cleaner, more efficient cars, but when will you start paying more to buy one?
It seems you've got a while.
The IRS tracks a few main EV carmakers -- Ford, Daimler AG-owned (DDAIF) Mercedes and BMW (BMWYY) . Since the tally began in 2010, Ford has sold the most EVs tracked at 104,910 through the third quarter of this year.
Taking IRS data on Ford since 2014, when the EV sales stabilized following the models' introduction, the average rate of cumulative sales gains between full years is 22.95%. With Ford's 88,335 EVs sold last year, it's on track to sell about 114,646 EVs this year.
That means that by the end of 2018, Ford could sell 148,795 EVs. At the close of 2019, the sales number jumps to 193,115. That makes it pretty likely that at some point in 2020, Ford will reach the 200,000 mark.
With that, there's no real need to scramble for that new Ford electric model to save money on the off-the-lot price tag. Given the current trajectory, it won't start costing more to buy a Ford EV until some time in 2020.
Tesla, too, likely won't hit the big mark anytime soon. The company announced in early 2017 it surpassed the 100,000 U.S. deliveries threshold. Many analysts had expected Tesla would hit the mark in 2018 with Model 3 deliveries, but as we know -- that hasn't turned out as planned.
Tesla has repeatedly pushed back its delivery estimates for Model 3s, and now expects it won't meet the 5,000 weekly production ramp level until late into the first quarter of next year. That's still a far way off from 200,000.
Of course, tax reform is worth considering. The House version of the legislation axes the rebate, but the Senate bill keeps it. Lawmakers could throw a wrench in the rebate plan with their loophole elimination, but major carmakers including Ford and General Motors Co. (GM) - Get Report are actively lobbying to keep the credit.
So if you're thinking of pulling the trigger to buy an EV this year, consider waiting for a newer model year with better amenities and maybe even greener tech. If the status quo continues and tax reform follows the Senate's plan for the credit, you've got plenty of time to save money.
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