Editor's note: Tesla's tax credits will begin phasing out when the company sells its 200,000th vehicle. A headline previewing this story in the daily e-mail report incorrectly said the tax credit would be exhausted this year.
SAN FRANCISCO -- Amid ramping up output of its mass-market sedan, Tesla Inc. is on track to begin losing a key buyer incentive this year.
In a SEC filing posted Friday, the electric-vehicle maker said it will likely sell its 200,000th vehicle this year -- the volume cap at which the $7,500 federal tax incentive for EVs begins to be phased out. Tesla will hit that limit in the same 12-month period the base Model 3 sedan, which starts at $35,000, is expected to go on sale.
"Under current regulations, a $7,500 federal tax credit available in the U.S. for the purchase of qualified electric vehicles with at least 17 kWh of battery capacity, such as our vehicles, will begin to phase out over time with respect to any vehicles delivered in the second calendar quarter following the quarter in which we deliver our 200,000th qualifying vehicle in the U.S.," Tesla said in the filing. "We currently expect such 200,000th qualifying delivery to occur at some point during 2018."
If Tesla delivers its 200,000th vehicle in the third quarter of 2018, the full credit would continue through that quarter and through the completion of the fourth quarter. The credit would then continue at $3,750 for the next six months, and at $1,875 for the following six months after that.
Tesla delivered 103,082 Model S, Model X and Model 3 vehicles in 2017. Model 3 deliveries began in July. However, the first wave of Model 3 vehicles produced featured Tesla's long-range battery, which starts at $44,000. The company's website says sales of Model 3s priced from $35,000 with a standard battery will begin in 2018.
The company has struggled to hit its production goals for the Model 3. In the filing, Tesla said it expects to produce 5,000 sedans a week by the end of the second quarter of 2018. However, further production bottlenecks, such as the automaker's current struggles with battery module output, could further delay targets. The company also stated in the filing it has secured just one cell supplier for its battery packs.
The end of the tax credit could be a deterrent to the more than 400,000 Model 3 reservation holders looking to buy a Tesla vehicle at a much lower price than the $68,000 Model S sedan or $79,500 Model X crossover.
Tesla would also run out of credits as competitors begin to launch EVs with plenty of room before hitting the 200,000 vehicle limit. The Model 3 has already had defections to the similarly priced Chevrolet Bolt, which requires little to no wait period, according to Reuters.