Factbox: Electric vehicle subsidies under pressure in some Tesla core markets

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© Reuters. Factbox: Electric vehicle subsidies under pressure in some Tesla core markets

(Reuters) – Tesla (NASDAQ:) Inc’s has steadily increased the sale of its electric vehicles, boosted by demand for its mass-produced Model 3 sedans as overseas sales pick up, and delivering more than 360,000 vehicles last year.

But analysts say demand for electric vehicles may sour as some governments around the world dial back subsidies.

Below is a summary of electric vehicle subsidy policies in Tesla’s core countries ranked by market size, according to analyst estimates and country vehicle registration data.

The U.S. federal government is subsidizing electric cars with a $7,500 consumer tax break for the first 200,000 vehicles an automaker sells. Once the threshold is met, the tax credit is cut by half for all vehicles sold over the next six months and is then halved again for another six months before running out completely.

The U.S. Congress at the end of 2019 declined to extend the cap to 600,000 electric vehicles per carmaker.

So far, only Tesla and General Motors Co (NYSE:) have hit the cap. Subsidies for Tesla finished at the end of 2019, while those for GM will run out on March 31.

NORWAY

Tesla has seen soaring demand from Norway, where electric cars made up more than 40% in sales last year, a global record.

The country has exempted battery-powered vehicles from the 25% income tax imposed on petrol and diesel engines. The government originally considered phasing out those incentives by the end of 2019, but an extension until the end of 2020 has been approved, according to the Norwegian Electric Vehicle Association.

CHINA

Beijing has been slowly rolling back a generous five-year subsidy program for so-called new energy vehicles (NEVs), which began in 2016. It plans to phase out subsidies after 2020 amid criticism that some firms have become overly reliant on the funds. But China said it would not cut subsidies again this summer, an approach cheered by automakers.

Tesla’s China-built Model 3 cars will still receive subsidies as part of the government’s NEV program, the company said in December.

Sales of electric and hybrid vehicles in 2019 dropped for the first time in more than two years as the subsidy cuts reached new levels and have continued falling since.

CANADA

The Canadian government last year passed a zero-emission incentive program under which buyers could receive as much as $5,000 in rebates for electric cars, and up to $2,500 in plug-in hybrids.

While those rebates only apply to cars below a purchase price of $45,000, the government has issued exemptions for some models up to $55,000.

The Model 3, starting at $35,000, is currently the only Tesla vehicle receiving a rebate of $5,000, according to government information.

NETHERLANDS

The Dutch government has extended an exemption for electric cars on purchase and motor vehicle taxes until 2025.

But the country in September decided to dial back income tax incentives for the private use of company cars beginning in 2020.

Under the new plan, those rates will steadily increase to be even with conventional cars in 2026. At the same time, the price for eligible electric company cars is dropping to 45,000 euros ($49,923) this year and 40,000 euros in 2021.

The Tesla Model 3, which retails for nearly 49,000 euros in the Netherlands, is therefore no longer eligible for company car benefits. Model 3 sales spiked significantly ahead of the incentive phase out, according to data from the Netherlands Vehicle Authority.

UNITED KINGDOM

The British government reduced its subsidies for electric cars at the end of 2018, but still offers rebates of up to 3,500 pounds ($4,600) for 31 vehicle models.

The UK is one of the few European countries, where all Tesla models are eligible for the rebate, according to the government.

GERMANY

Electric vehicles in Germany are currently subsidized with a 4,000 euro ($4,437) grant while buyers of plug-in hybrids receive 3,000 euros – if the vehicle costs less than 60,000 euros.

That puts Tesla’s pricier Model S (which starts retailing for 86,800 euros in Germany) out of reach, but at a starting price of 44,400 euros the Model 3 is eligible.

The subsidies are split evenly between the German federal government and the carmaker.

The government in November made plans to increase the grants by half over the five years from 2020.

But the German government said it is still awaiting approval by the European Commission on those increases.