January 2, 2019 4:26 pm

Tesla trims U.S. prices after tax incentives reduced

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For U.S. customers, buying a Tesla just got a little more expensive — even though the company just announced a discount on each of its models.

Tesla Inc. has sold more than 200,000 vehicles in the country, a milestone that triggers the wind-down of a major federal tax incentive for buyers.

READ MORE: Court rules in favour of Tesla over Ontario government’s cancellation of electric vehicle rebates


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The tax credit for buying a Tesla dropped from $7,500 to $3,750 per vehicle on Jan. 1, the company said.  It will eventually be phased out.

The automaker said Tuesday the cost of its Model S, Model X and Model 3 vehicles will be reduced by $2,000 to “partially absorb” the reduction.

Tesla has not said if there are any changes to pricing in Canada. Last year, the Ontario government cancelled an incentive program that provided a tax credit of up to $14,000.

Tesla successfully launched a lawsuit against the provincial government, alleging that the company wasn’t treated fairly in the wind-down of that program.

WATCH: Tesla wins lawsuit against Ontario government over vehicle rebates

Tesla may not be the only auto manufacturer to be facing reduced incentives for its U.S. buyers.

A source told Reuters that General Motors has also hit the threshold and tax incentives on its vehicles will be phased out by 2020.

The tax credit is aimed at defraying the cost of electric vehicles that are more expensive than similarly-sized internal combustion engine vehicles. In 2009, Congress set the phase-out threshold at 200,000 vehicles per manufacturer.

READ MORE: Elon Musk says he may be interested in buying some closing GM plants

GM, which said previously it expected to reach the figure before the end of 2018, declined to comment ahead of the release of its quarterly sales results on Thursday.

GM and Tesla have both lobbied Congress to lift the cap or extend the existing tax credit. GM said in November it was doubling resources allocated to developing electric and self-driving vehicles as part of a significant restructuring that includes ending production at five North American plants, including one in Oshawa, Ont.

READ MORE: Elon Musk to resign as Tesla chairman, pay $20M in SEC settlement

Thousands of U.S. buyers have taken advantage of the tax discounts so far. In November, a congressional report said 57,066 taxpayers claimed $375 million in EV tax credits in 2016. Congress estimates the cost of the EV tax credit at $7.5 billion between the 2018 and 2022 fiscal years.

— With files from Reuters

© 2019 Global News, a division of Corus Entertainment Inc.

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