Sometime in early 2018, the EV community in the U.S. will buzz about the specific clauses in the Internal Revenue Service section code IRC 30D, better known as the “Plug-In Electric Drive Vehicle Credit.” That’s the code that allows for up to $7,500 off on federal taxes for the purchase of a new electric vehicle. It’s one that has a “sunset” clause that is specific to each vehicle manufacturer’s success. Once each manufacturer (OEM) reaches 200,000 cumulative U.S. sales of all of its EVs (from 2010 onward) the phaseout process begins. So, the more EVs an OEM sells, the quicker the credit will sunset. That mean the OEM that wins, is first to lose, but has actually won (because of their success).
Who will be first and when? That’s the $1.5-billion question, but it’ll likely be a horserace between Tesla and General Motors (GM).
First, let’s take a look backward. While GM rightfully celebrated the sale of the 100,000th Volt on August 1st, as a manufacturer, it likely crossed the halfway point in April. That’s because it also makes the Chevy Spark and, until recently, the Cadillac ELR. Tesla is likely crossing the halfway point right about now (September/October-ish). “Likely” and “ish” because Tesla does not report its monthly sales or regional allocations. InsideEVs, from which we draw much of our sales data, captured Elon’s explanation on why Tesla does this in this post.
Looking forward into the crystal ball (read: an excel spreadsheet) and making a few conservative assumptions, it appears that Tesla will cross the line first, in the first quarter of 2018, followed shortly, a quarter or two later, by GM.
Even when an OEM crosses the 200,000 mark, the phaseout process could take anywhere from 16 to 18 months before the credit is zeroed out. To understand this, we must begin at the beginning. The IRS code describes when a phaseout starts for each manufacturer (it’s cozy reading in Section 2 of IRS Bulletin: 2009-48) like this:
“The new qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States”
….the second calendar quarter after the calendar quarter in which… wait! WHAT?
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