Denmark’s tax increase on electric cars could be a blessing in disguise for Tesla

2015-Tesla-Model-S-P85D-consumer-reports-scoreLast week Denmark’s new government announced that they plan on phasing out tax breaks for electric vehicles in the 2016 budget.  The new provision would increase the price of all-electric cars significantly, but even more so for luxury vehicles like the Tesla Model S, which would see its price increase by ~180%.

It’s obviously bad news for electric cars in the mid- to long-term, but it could actually be a blessing in disguise for Tesla which needs to significantly increase sales in the short-term to achieve its 2015 delivery guidance. Tesla needs to deliver ~16,900 cars worldwide from October to December to achieve the low-end of its 2015 guidance of 50,000-55,000 vehicles. The company would need to increase global deliveries by 46% over the previous quarter, a feat Tesla hasn’t achieved since 2013.Tesla Model S sales Q3 2015The potential of an imminent major increase in price could convince quite a few buyers to pull the trigger on a Model S purchase before the tax breaks end next year. When talking to Bloomberg about the new tax policy, Marcus Asplund, an economics professor at the Copenhagen Business School, said he was himself evaluating the possibility of placing an order for the Model S before the end of the year to take advantage of the tax breaks.

Even with the tax breaks, Denmark isn’t a big market for Tesla, even though the Model S is still the best-selling electric vehicle in the country and sales have been increasing steadily based on registration data:

model s registration denmark sept 15Denmark is still only the fifth biggest European market for Tesla and far behind neighboring countries like Norway and the Netherlands. In the long-term, a decrease in sales due to the phasing out of tax breaks for electric vehicles is unfortunate, but it wouldn’t make a big difference on global sales.

On the other hand, the short-term boost that the end of the tax breaks could bring would make an important difference for Tesla’s 2015 sales goal. It would also undoubtedly illustrate the electric vehicle industry’s reliance on government incentives…

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