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Tesla uses Biden tax credit to offset EV price cut

Seoul – Tesla CEO Elon Musk ready to cut Electric car In a downturn, they will raise prices again to boost sales, in part because of the big money from the Biden administration’s tax credits.

Musk said Wednesday that Tesla is facing “turbulent times” and that “it makes sense to sacrifice margins to produce more vehicles.”

Tesla shares fell nearly 10% on Thursday as investors worried the automaker’s profits, which have steadily declined over the past year, could face further headwinds.

But regardless of whether Tesla offers additional discounts, battery Manufacturing gives it a competitive edge over rivals that produce less batteries. ReutersAn analysis of the company’s second quarter earnings shows.

Tesla cuts prices in the US, China Other markets have expanded since the end of last year.a Model Ynow the world’s best selling vehiclecost 20% less than Christmas 2022 in the United States, and including the $7,500 Biden tax credit, prices are down 35%.

A combination of Tesla’s dynamic discounting strategy and subsidies boosted U.S. sales by 35% in the second quarter from a year earlier, according to data from Cox Automotive.

A Reuters analysis based on Tesla’s forecasts and U.S. sales said the battery tax credit under the Inflation Control Act, which took effect this year, equates to about $900 to $1,400 in subsidies per Tesla sold in the U.S. in the second quarter.

Combined with the $600 per vehicle Tesla amassed by selling regulatory offsets to other manufacturers, emission standardsU.S. government subsidies mostly offset a $2,500 price cut in the same quarter for the long-range version of the Model Y.

“Tesla’s manufacturing tax credit should help at least partially offset some of the price cuts Tesla had to make to stimulate demand,” Morningstar analyst Seth Goldstein said in an interview.

Tesla’s Bonanza

Tesla is the largest beneficiary of battery production credits under the IRA, which provides incentives to US manufacturers. The company makes batteries in Nevada with supplier Panasonic and is ramping up production at its own factory in Texas.

Consultancy Benchmark Minerals Intelligence expects Tesla and Panasonic to collect about $1.8 billion in production credits this year, well above the company’s $480 million estimate. general motors and its battery supplier LG Energy Solutions.

Despite benefiting from tax credits, Musk criticizes the US President Joe Biden Many of his policies called for the abolition of subsidies.

Chief Financial Officer Zach Kirkhorn said Tesla plans to accrue $150 million to $250 million in battery credits each quarter this year after considering a subsidy split with Panasonic. That number could go up further if Tesla expands battery production.

“The credit value this year isn’t huge, but I think it could be huge,” Musk said at Tesla’s earnings call in January.

Under the IRA, manufacturers qualify for tax credits based on the capacity of U.S.-made batteries. For the Model Y, that would be $3,375 per vehicle if paid in full before paying Panasonic.

Many analysts exclude regulatory credits that Tesla collects from other automakers, but include Biden’s manufacturing credits. calculate The underlying profit margin.

Excluding regulatory credits, Tesla’s quarterly automotive gross margin fell to 18.1% in the second quarter from 26% a year ago.

Related video: Tesla uses Biden tax credit to offset EV price cut

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