Tesla taps Biden tax credits to offset EV price cuts

economictimes.indiatimes.com:

Tesla CEO Elon Musk is ready to cut electric car prices again to drive sales if the economy swoons, and part of the reason is a bonanza from Biden administration tax credits. «It does make sense to sacrifice margins in favor of making more vehicles,» Musk said on Wednesday, noting that Tesla was facing «turbulent times.» Tesla shares fell nearly 10% on Thursday as investors worried that the automaker's margins, which have been in steady retreat for the past year, face further headwinds. But whether Tesla offers additional discounts or not, the tax credits for battery manufacturing give it a competitive edge over rivals that make fewer batteries, Reuters' analysis of the company's second-quarter results shows.

Tesla has slashed prices in the United States, China and other markets since late last year. A Model Y, now the world's best-selling vehicle, costs 20% less in the U.S. than at Christmas 2022.

Including the $7,500 Biden tax credit, the price is down 35%. Tesla's dynamic discounting strategy, combined with the subsidies, helped boost its second-quarter U.S. sales 35% from the year-ago period, Cox Automotive data showed.

The battery tax credits in the Inflation Reduction Act, which kicked in this year, amounted to a subsidy of about $900 to $1,400 on every Tesla sold in the United States in the second quarter, according to the Reuters analysis based on Tesla's forecast and U.S. sales. Combined with $600 per vehicle Tesla collected from selling regulatory offsets to other manufacturers to meet emissions standards, the U.S.