Tesla AimsTo Maximize Tax Credits By Imcreasing Model 3 Production

Apr 11, 2016 05:00 AM EDT | Victor Thomson


Customers who pre-ordered Tesla Model 3 are worried whether the federal tax credit will still be available when their car will be manufactured and delivered. Tesla Motors announced Model 3 reservation holders in an e-mail sent Wednesday night that the company strives to minimize the waiting time for its new car model by increasing its productions plans.

The company claims that it has received more than 325,000 reservations for the Model 3, according to . This figure is far exceeding Tesla's own expectations. 

Customers line up to pre-order the Tesla Model 3 upcoming car more than a year ahead of when it is expected to hit the streets. However, the $35,000 electric car is by no means cheap.

The federal tax credits offered to customers are an important incentive for sales. But once Tesla will reach 200,000 car sales, the federal tax credit will shift from a focus to when the cars are sold rather than how many cars have been sold.

According to the website , the federal tax credits regulation stimulates Tesla Motors to increase production. For example, if the company would sell 200,000 cars until January 1 2018, every car it will sell during the rest of the next two quarters would get the tax credit.

The pre-orders for the upcoming Tesla Model 3 represent "about $14 billion in implied future sales."  After Tesla achieved the performance of more than a quarter-million orders in the first three days, the company's Chief Executive Officer Elon Musk declared that this figure was at least twice his expectation.

Tesla Motors delivered just 50,658 vehicles in 2015, raising questions how it would be able to increase the manufacturing capacity at its Fremont, California, factory. The company announced its plans to produce cars in much higher volumes and increasing production plans for the Model 3.

To preserve the tax credit for as many Model 3 customers as possible, Tesla Motors would need to produce right from the start around 3,000 cars a week.

Tesla did not give details on how it will achieve this goal. In case that the maximum production could not be achieved, another open possibility is a temporary reduction of sales to maximize the tax credit.

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