EV and Battery Credits

[Buckminster]

Presumably just putting air suspension in the Model Y that can lift the vehicle to the relevant angles/clearance levels would be the cheapest way to get it to conform with the criteria. Tesla already uses the technology so presumably it should be fairly easy to adapt. It also creates a better product but may require more maintenance.

On a side note, it's nice to see the US Government using the metric system. Perhaps there's hope for you yet.

Harsh suspension is probably the single biggest that I have with my MYLR (with the larger wheels) so would go a long way for me as a premium feature.

 

[mongo]

What are the downsides to making 3rd row standard? Underfloor storage is maintained and they fold down. Cost is probably <$1k to Tesla. Upside would be a reduction in the number of variants.

Along with cost, there would be a minor loss of cargo space, range, and payload.
FWIW, our SUVs spend most of their life with 3rd row folded.

 

[Fairchild]

Some clarity as of yesterday.

Here are the Tesla models eligible for $7,500 US federal tax credit

The IRS has now released its full list of electric vehicle models eligible for the new and updated $7,500 US federal tax credit.

electrek.co

I am sure the Feds will have to sort out the inconsistencies.

 

[Buckminster]

MarketWatch - 11:42 am ET:
Leased electric vehicles now qualify for $7,500 tax break

So who gets the tax break? Tesla or the lessee?

 

[mongo]

So who gets the tax break? Tesla or the lessee?

The lessor (so Tesla or third party).

 

[Buckminster]

Been thinking about this IRA mess...
Tesla needs to decide how they want to achieve eligibility, as doing nothing is really NOT an option...
1. They can decide to lower MSRP to fit under $55K limit. Note that MY LR AWD was $50K for the second half of 2020. This choice would be an issue for performance MY.

2. They can decide to tweak the non-7-seater hardware to allow eligibility to $80K limit. Multiple choices here, increase GVWR with new springs or add air suspension to allow greater height as needed.

I think Tesla would have satisfactory margins with option 1, but not the 30% we've gotten accustomed to. Option 2 seems more likely, but higher prices for the hardware changes don't necessarily help with demand as Giga Austin ramps. Maybe Tesla straddles both options somehow. Offering the RWD LR would be a quick solution while they work the suspension options that allow $80K limit.

They can do both, but option 1 is going to sell more cars.

The tax credit is the same regardless of selling price, the best deal for the customer is a lower price.

The 7 seater version can cost a bit more than $55K, they want a 5 seater for under $55K.

If a service center can fit the 2 extra seats, the factory can make mostly 5 seaters which are upgraded as needed.

If some options tip a 5 seater over $55K, then that should be a special production run of 7 seaters.

The 4680 packs stockpiled at Austin may be for a 5 seater for less than $55K.

All 2170 packs used for 7 seaters is one possibility.

 

[cwerdna]

Curt's link points to a PDF that you can find at Frequently Asked Questions About the New, Previously-Owned and Qualified Commercial Clean Vehicles Credit | Internal Revenue Service along with web pages for each of the topics.

 

[Buckminster]

How about:

MYSR - <$55k, no 7 seat option, 150 miles range with post purchase bump set at $5k
MYLR - 7 seats only
MYP - no 7 seat option, air suspension std

 

[adiggs]

The lessor (so Tesla or third party).

Literally true, but what makes the lease valuable is the lessor passing that benefit through to the lessee.

Using the lease option as a backdoor into the full tax credit for all buyers (lessees) is a gaping wound of a workaround. It is even more beneficial than it looks - people with incomes that are too high look like this is a path to them also receiving the benefit of the tax credit. AND a buyer gets the benefit immediately, rather than waiting for tax time to take the credit (and possibly not having enough tax liability to make use of the credit).

 

[Buckminster]

https://twitter.com/x/status/1610068610902548485

Which wheels spec require a 1.8" ground clearance increase?

 

[mongo]

https://twitter.com/x/status/1610068610902548485

Which wheels spec require a 1.8" ground clearance increase?

Isn't the final wheel/tire combo radius roughly identical regardless of rim size?

 

[Buckminster]

No action was taken was done to specifically exclude the 5 seat Y. Its exclusion is a default state of being.

The $80k MSRP is for SUV, vans, and pickup trucks which are all versions of 'light truck'.
The Federal Law, since 2009, has allowed a vehicle with minimal ground clearance to qualify as a 'light truck' if it has 3 rows of seats where 2 rows fold flat for cargo (only reason a 7 seat Y qualifies). 49 CFR § 523.5 - Non-passenger automobile.
This section of the law is under NHTSA section.
The EPA definitions also rely on this regulation (light ttuck vs passenger vehicle). However, the EPA Administrator can modify vehicle classifications. Further, the EPA allows grouping cars by model line which apparently allows the latitude to group all Y under the SUV banner.

Treasury could update guidance to expand the groupings. If they do, that opens them to further criticism since some person/ group becomes the sole judge of MSRP cutoff.

 

[Buckminster]

IRS invites consumers to comment on EV tax credit qualifications

 

[Buckminster]

I'll predict if the IRA rulemaking is not fixed by the administration relatively quickly, that Tesla releases at least two versions of the Model Y:

1) An edgy "adventure" version with 15% less range and bigger tires and suspension
2) An efficient, range-leading version seating 5 adults and 2 children.
3) Possibly the standard version for people who want a good price and can't take advantage of the IRA credits anyway.

Both 1&2 will qualify for the credits and both versions will outstrip supply for years to come at margins that shock auto industry veterans. The call will be put out to end the tax credits but politics move slowly so it will take years to do so. Model Y will break all kinds of historical annual sales records for any vehicle in any class.

 

[Buckminster]

I’m sure you’re right. It’s the 3rd of January. Maybe 6 days after the stupid IRS guidelines were launched?

I‘m guessing Tesla management is still working out exactly the best strategy to deal with this. It’s very easy to say “They should just…”, but Tesla actually needs to reallocate production to implement many of these solutions. There is no point rushing out some half-baked solution only to realize they don’t have the production capacity for that particular model to execute on it.

Can anyone point me the rationale for a higher curb or GVWR allowing a 5 seat Y to be classified as a 'light truck'? I see nothing in the legislation that would bypass 523.5 (b)(2) 49 CFR § 523.5 - Non-passenger automobile.



That would seem to run afoul of Treasury guidance due to the additional capacity being "physically attached at the time of delivery to the dealer".

 

[mongo]

Need to read up more on this. I wonder if something as simple as an LLC would get this credit.

Per my understanding, yes. If the car can be depreciated, it can get the credit. Interesting question will be: is that pro-rated by percentage business use?
From IRS FAQ:
Topic G — Frequently Asked Questions About Qualified Commercial Clean Vehicles Credit | Internal Revenue Service

Q1. Who is eligible to claim a credit under § 45W of the Code for purchasing a qualified commercial clean vehicle (qualified commercial clean vehicles credit)? (added December 29, 2022)
A1. A taxpayer can claim a qualified commercial clean vehicles credit for purchasing and placing in service in the taxpayer's business a "qualified commercial clean vehicle" during the taxable year. The taxpayer must use the vehicle for a "business use." See FAQ 8.

Q8. What does "of a character subject to the allowance for depreciation" mean for purposes of the qualified commercial clean vehicle credit? (added December 29, 2022)
A8. In general, property is subject to the allowance for depreciation if it is used in a trade or business of the taxpayer or for the production of income (business use).

 

[bkp_duke]

Per my understanding, yes. If the car can be depreciated, it can get the credit. Interesting question will be: is that pro-rated by percentage business use?
From IRS FAQ:
Topic G — Frequently Asked Questions About Qualified Commercial Clean Vehicles Credit | Internal Revenue Service

We have two cars on our business, both Tesla's. The amount we can deduct each year for business expenses is the % usage for business (vs. personal). I would expect that things are the same as in the past, where the credit reduces the initial purchase price of the vehicle, and then your annual depreciation is over the typical 5 year period, and proportional to % business usage.


I don't see the same restrictions on this as what is on the personal IRA (55k and 80k, respectively). Would the QCCVC be a possible loophole to buy something like a Plaid and claim the $7500 credit? Would not be the first time we have seen something like this, as stupid things like Hummers qualified just because of GVW.

 

[mongo]

We have two cars on our business, both Tesla's. The amount we can deduct each year for business expenses is the % usage for business (vs. personal). I would expect that things are the same as in the past, where the credit reduces the initial purchase price of the vehicle, and then your annual depreciation is over the typical 5 year period, and proportional to % business usage.


I don't see the same restrictions on this as what is on the personal IRA (55k and 80k, respectively). Would the QCCVC be a possible loophole to buy something like a Plaid and claim the $7500 credit? Would not be the first time we have seen something like this, as stupid things like Hummers qualified just because of GVW.

Yep. That's the current congress topic, a lease via QCCVC bypasses most all the Clean Vehicle requirements other than 7kWh battery (or fuel cell).
Same with a company purchase.

If a car is 5% business, it 'is' deprecable, so full credit? What if bought in December and used 100% for business the first year? So many questions...

 

[bkp_duke]

Yep. That's the current congress topic, a lease via QCCVC bypasses most all the Clean Vehicle requirements other than 7kWh battery (or fuel cell).
Same with a company purchase.

If a car is 5% business, it 'is' deprecable, so full credit? What if bought in December and used 100% for business the first year? So many questions...

This is where CPAs are worth their weight in gold.

My understanding is the credit will reduce the purchase price, but depreciation each year is by % of usage for business. Depreciation is not linear, first year is greatest.

Plus, if you sell an old car on a business depreciation schedule to buy a new one, the purchase price of the new one is reduced by the sale price of the old (hence why leases are so popular for businesses).

 

[mongo]

This is where CPAs are worth their weight in gold.

My understanding is the credit will reduce the purchase price, but depreciation each year is by % of usage for business. Depreciation is not linear, first year is greatest.

Plus, if you sell an old car on a business depreciation schedule to buy a new one, the purchase price of the new one is reduced by the sale price of the old (hence why leases are so popular for businesses).

Yah, I understand the depreciation side of things. My wondering is what level of depreciation triggers "of a character subject to the allowance for depreciation" to get the credit. 1%? 51%?

It could be they use " The amount of the qualified commercial clean vehicle credit is the lesser of (1) 15 percent of the taxpayer's tax basis in the vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or (2) the incremental cost of the vehicle." and prorate the basis for business use.
That still leaves open clawback issues.