Transportation & Land Use

325,000 reserved the new Tesla – what does it mean for EVs?

tesla lineLast week, more than 325,000 people reserved a Tesla Model 3 – including more than 180,000 during the first 24 hours.

  • The Model 3 is expected to be priced around $35,000 with a range of more than 200 miles
  • In Minnesota alone, more than 500 people waited in line to reserve their car by paying their $1,000 deposit
  • That level of demand will eventually bring Tesla over a critical threshold for federal tax credits

This is the latest is a series of events showing the growing demand for electric vehicles (EVs) in Minnesota and nationally, including an all-electric room at the Twin Cities Auto Show and a bulk buy promotional program on the Nissan Leaf in the month of March. With the Chevy Bolt (another 200 mile electric vehicle expected to cost around $35,000) and potentially an upgraded Nissan Leaf set to release next year, a year ahead of the Model 3, there will be big changes in the automotive market.

In business, there’s often a benefit to being first. For example, the Tesla Model S and Nissan Leaf have essentially cornered the higher end and lower end of the EV market because they were essentially the first models sold broadly to consumers. But due to the structure of the federal tax credit, there might actually be a downside to being a pioneer.

tax credit breakdownAs it’s structured right now, the federal tax credit for EVs begins to taper off once a given manufacturer sells their 200,000 EV (as seen in the table to the right).

This will actually give slower movers like Toyota and Volkswagen a competitive advantage over industry leaders such as Nissan, Chevy, and Tesla, and others no longer offer the federal tax credit. This should serve as a great example that getting the details right when it comes to public policy is absolutely critical. If the threshold for tapering the tax credits had been tied to broader market penetration rather than each individual manufacturer, it could have further incentivized competition.

As the demand for EV’s grows, it’s important to keep a close eye on how these policies are impacted the market nationally and in Minnesota. The value that EVs provide to the grid (controllable load growth, overnight charging when demand is low and wind is plentiful, supporting the grid) make them an important asset to develop as we transition to a cleaner, more efficient energy system.

This is the latest is a series of events showing the growing demand for electric vehicles (EVs) in Minnesota and nationally, including an all-electric room at the Twin Cities Auto Show and a steep discount on the Nissan Leaf in the month of March. With the Chevy Bolt (another 200 mile electric vehicle expected to cost around $35,000) set to release next year, a year ahead of the Model 3, a new issue is about to be raised in the world of electric vehicles: the downside of being first to market.

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