Tesla will cover lost electric vehicle subsidies for German buyers through Dec. 31, after Germany's government abruptly ended the program early.
Tesla stock reversed slightly lower on Monday.
Germany's coalition government, facing a budget crisis, on Saturday ended the "environmental bonus" program as of Sunday. That's up from the previously scheduled Dec. 31 expiration. That's a blow for Tesla, Volkswagen, BMW, Stellantis and more.
Germany's EV subsidy had been up to 4,500 euros ($4,909) for consumers, along with 2,250 euros for the automaker.
Just a few days earlier, Berlin announced that the EV subsidy would not continue in 2024 at a reduced rate of 3,000 euros ($3,273).
As of Sept. 1, the EV subsidy expired for businesses and was limited to private individuals. The business tax expiration spurred a big rush to buy EVs.
But with the subsidy program ending two weeks early, that threatened to stop short a last-minute buying spree. Just on Dec. 12, Tesla offered German buyers 0.99% loans for those who ordered by Dec. 18 and took delivery by Dec. 31. Many of those ordering under that promotion won't get the 4,500-euro subsidy now.
However, on Monday the EV giant announced on Elon Musk's X that "Tesla will compensate for the termination of the government EV subsidy in Germany for new Model 3/Y orders (starting 18 Dec for vehicles delivered by 31 Dec)."
Tesla is straining its 2023 target of 1.8 million vehicles. The EV giant needs to sell just under 476,000 EVs in Q4 to do so.
The hefty new Germany incentive, on top of generous inventory discounts, could help Tesla get over that line. But it's one more move that will pinch earnings and profit margins.
Tesla's Berlin-area plant reportedly will shut production after Dec. 22 and not reopen until Jan. 2, 2024. The plant, like Tesla Shanghai, is running well below capacity.
Tesla Model 3 Electric Vehicle Subsidies Lost In France
Germany's move comes amid tighter restrictions on EV subsidies in France.
As of Dec. 15, France effectively limited EV subsidies of up to 7,000 euros ($7,636) to electric cars made in Europe. Chinese-made vehicles, including the Tesla Model 3, are no longer eligible. The Model Y will still be eligible because Tesla makes the crossover at its Berlin-area plant.
French Model 3 sales surged in November and presumably were strong in the first half of December, but should now fall off. That will impact Tesla Shanghai going forward.
Germany and France are Tesla's two largest markets within Europe.
EV Boom Losing Its Charge; What That Means For Tesla And The U.S. 'Battery Belt'
IRA Credits Scaled Back
Meanwhile, the base Rear Wheel Drive and Long Range Model 3 variants will lose their $7,500 tax credits under the Inflation Reduction Act as of Jan. 1 due to tougher restrictions on battery sourcing. Until a week ago, the expectation was that those Model 3 vehicles would lose half their credits.
The base RWD Model 3 uses LFP batteries from China's CATL. The LR Model 3 uses traditional 2170 lithium-ion batteries from South Korea, but some materials and components hail from China.
Tesla presumably will try to source batteries to regain those credits, but there's no quick fix. The Tesla-Panasonic plant outside Reno is production limited. Tesla's 4680 battery cell production is ramping up from a low base.
The expiring or restricted EV subsidies and credits in the U.S., France and Germany have acted as a pull-forward demand incentive for Tesla. Demand may weaken substantially next year in these countries barring significant further price cuts or discounts.
Separately, the European Union is opening infringement proceedings vs. Elon Musk's X, the social site formerly known as Twitter. EU regulators say they are taking the step vs. X for violating transparency obligations and duties to counter illegal content and disinformation, as well as in claims of a "deceptive" user interface.
Tesla Stock
Shares fell 0.6% to 252.08 on Monday after rising to 258.74 intraday.
Tesla stock rose 4% to 253.50 last week in strong volume, clearing two early entries. TSLA has an official 278.98 buy point from a five-month double-bottom base.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
