California and Norway May Drop Tesla Incentives for the Rich

Government cash “incentives” have been the key to Tesla’s initial success, because buyers can often use the incentive and rebate payments to meet their down-payment for a $100,000 vehicle. But incentives may be reduced or terminated in the company’s biggest markets in California and Norway,which represent 25 percent of sales.

California, at $2,500 per unit, has one of the highest of the 39 state incentive programs for purchasing an electric vehicle (EV). That explains why the Golden State accounts for 40 percent of the U.S. plug-in market.

Bloomberg News stated that EV incentives were intended to rid the roads of gas-guzzlers spewing carbon pollution by making electric cars more affordable to a broad range of consumers. But with the minimum sales price of Tesla Model S starting at $71,000, the 13,598 California Tesla buyers captured about a fifth of the state’s $203 million in incentive rebates since 2010.

A new California state report showed that 77 percent of consumers that bought an EV earned more than $100,000 a year. That has led California and a number of other states to draft and pass new regulations that will ration incentives in an effort to stop subsidizing “limousine liberals.”

California Republican State Senator Ted Gaines told SiliconValley.com that he introduced legislation limit rebates to cars that cost no more than $40,000, because the majority of rebates have gone to individuals earning at least twice the national income.

“It’s hard for the average Californian to understand why someone buying a $100,000 car should get a rebate.” Gaines added, “That’s the same question I posed to myself, and it was hard to justify.”

EV incentives are under attack in other states as an entitlement for the rich. Georgia Republicans passed a state transportation funding bill that terminated a $5,000 EV incentive and now charges EV users a $200-a-year fee. Democrat Governor Jay Inslee plans to end Washington’s EV sales tax exemption for vehicles costing over $45,000.

The effort by multiple U.S. states to limit high-end EV rebates comes at a time when Norway, with five percent of Tesla’s sales, is expected by April to run out of EV incentives. For the first 50,000 sales of plug-in vehicles, Norway generously waved its 25 percent value-added tax, eliminated toll road charges, offered free municipal parking, allowed free EV access to bus lanes, and provided 3,200 free charging stations. But as an oil-production based economy, Norway’s budget is economically hemorrhaging after the price of crude oil crashed by 55 percent in the last year.

Tesla (NASDAQ:TSLA) released first quarter unit sales on Good Friday that surprised analysts on the upside with a reported 10,030 deliveries. That number far exceeded the company’s guidance of only 9,500 units. But the good news moved Tesla’s stock up by less than 2% to $191.00, because the higher sales were mostly due to Norwegians speeding up purchases as the country’s incentives are about to run out.

SiconValley.com interviewed Apple co-founder Steve Wozniak about why he purchased two Teslas. With an estimated $100 million net worth, he said the incentives played no role in his decision to buy the vehicles. But even the “Woz” took the incentive cash.

Wozniak commented on the incentives’ effectiveness, “I think there are a lot of people who are buying the low-end Tesla and that $10,000 made it happen for them.” But he added, “Of course you take advantage of it. It’s not like I had a choice. I could say I don’t really need to, which I don’t, but why would I pass it up? What good is that?”

Chairman Elon Musk sounded confident in February when he reassured analysts Tesla would deliver 55,000 vehicles. For the first three months of 2015, the company is ahead of plan. But the big bump in Tesla sales is expected from selling 15,000 of the new Model X at a base price of $80,000 and a delivery date beginning around July.

The Model X is priced at about double the potential purchase price ceiling for state incentives. With state incentives shrinking, Tesla for the first time will need to find a lot of really rich people like Steve Wozniak who are willing to make real cash down payments to buy a Tesla EV.