The road too often traveled

2 January 2019 By Antony Currie Follow @AntonyMCurrie

The electric-car maker’s CEO might sustain demand by cutting prices to offset a reduced tax break for buyers. But that could slash earnings in half. Putting volume over profit was one of Ford and GM’s pre-crash mistakes, hurting quality too. Musk is driving down a similar road.

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Tesla on Jan. 2 said it would cut the price of each vehicle by $2,000 to help offset the reduction in federal tax credits that took effect at the start of 2019.

Buyers of the Model 3, S or X can now claim back only $3,750 from Uncle Sam, compared with $7,500 beforehand. That’s because total U.S. sales by Tesla hit 200,000 last year, the level at which the federal electric-vehicle tax credit starts to be phased out for each manufacturer.

The tax credit for new Teslas will be $3,750 for the next six months. It will then be cut in half again and will expire completely at the end of 2019.

Tesla on Jan. 2 also said that it delivered 90,700 vehicles in the fourth quarter. That’s 8 percent higher than in the three months to the end of September, but some 1.4 percent below analysts’ estimates as compiled by FactSet.

Context News

Tesla on Jan. 2 said it would cut the price of each vehicle by $2,000 to help offset the reduction in federal tax credits that took effect at the start of 2019.

The tax credit for new Teslas will be $3,750 for the next six months. It will then be cut in half again and will expire completely at the end of 2019.

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