Despite expectations by the 325,000 Tesla Model 3 buyers that put down preorder deposits they would get $10,000 in federal and state rebates, it appears that all of them will get stiffed.
Breitbart News reported the $325 million in deposits Tesla Motors Inc. picked up during its first week of preorders for their $35,000 Model 3. The company will not start deliveries until at least late 2017 — but the early cash rescued the company from a precarious negative working capital crisis.
According to the company’s recently released annual report, Tesla was cash flow insolvent because they had a working capital (= current assets – current liabilities) deficit of -$24.7 million. Without Tesla already holding $283.4 million in customer deposits, their insolvency would have ballooned to a negative -$301.8 million.
One of the main reasons Tesla Model S and Model X customers from California were willing to give the financially dicey company cash deposits is they expected to gained the right to get $7,500 in federal cash rebates and another $2,500 in California state cash rebates when their $100,000 luxury vehicles were delivered a year later.
With an entry selling price of $35,000, the 100,000 middle-class Californians that put down a $1,000 deposit for a Model 3 expected the $10,000 in government cash would more than pay for the down payment to finance the car.
But the $7,500 federal tax credit for electric vehicles is capped at a maximum of 200,000 units sold for any U.S. manufacturer. According to the Tesla Motors Club website, the company has already delivered 67,000 Model S and Model X vehicles, plans to deliver at least 80,000 vehicles this year, and another 150,000 in 2017. That means that all the federal credits will be long gone before the first “3” is delivered.
The $2,500 California state rebates are still available for “3” buyers. But the Legislature and the Governor agreed last week to cap customer eligibility for rebates to single filers earning less than $250,000 a year, head-of-household filers making less than $340,000, and joint filers with combined incomes less than $500,000.
Patrick Min, senior analyst at the automotive company ALG, told the Los Angeles Times: “Buyers shouldn’t be counting on either the federal or the state-level incentives as part of their financial calculations in purchasing the vehicle.”
Tesla founder and CEO Elon Musk has built a basket of vehicle, rocket, solar and battery companies that all lose money around $4.9 billion in government subsidies, according to the Los Angeles Times. But there is no guarantee new subsidies will be available in the future.