Why Tesla Motors Inc (NASDAQ:TSLA) Has A Golden Opportunity In Germany


It has emerged that Germany is working toward rolling out a generous subsidy for buyers of electric vehicles (EV) and Tesla Motors Inc (NASDAQ:TSLA) appears well-positioned to take advantage of the opportunity. Germany’s EV incentive comes with several strings attached but Tesla meets or can meet nearly all the requirements. For example, the subsidy will only be available for EVs that cost less than at €60,000, and Tesla’s Model 3 fits right there as it starts at $35,000.

Germany’s EV incentive program also comes with some time restrictions in the sense that EVs that come to market before 2018 will get larger subsidies that those that come to market later. Tesla is expected to start delivering Model 3 in the latter part of 2017.

What’s the payout?

Germany could finalize the law on EV subsidy any time after officials from the country’s ministry of finance meet auto industry representatives. The EV incentive program will award €3,000 ($3,400) credit to buyers of hybrid cars and €5,000 ($5,600) to fully electric vehicles.

The winner takes all

Germany’s EV subsidy won’t be a perpetual program, at least, initially. The program that is being developed has its cumulative payout capped at €1.2 billion and it is kind of the winner takes all offering. For example, if Tesla Motors Inc (NASDAQ:TSLA) is able to sell its cars faster than the competition, it could end up taking all the €1.2 billion credit allocation for EVs sold in Germany.

There is already strong demand for Tesla Motors Inc (NASDAQ:TSLA)’s Model 3. As of the last update, preorders were nearing 400,000. If Tesla could generate strong demand for Model 3 in Germany, it could bag all of the country’s €1.2 billion incentive for EVs.

Germany’s EV incentive program will fade as years go by. For example, EVs that come to market in 2017 will qualify for a larger payout and the payout will drop to €2,000 and €3,000 for hybrid and pure EVs, respectively in 2018.

Cutoff mark

Germany’s EV credit program will also only go out to buyers of EVs whose prices don’t exceed €60,000 ($68,000). That requirement disqualifies many of Tesla’s rivals and Tesla’s own other models such as Model S and Model X. But the Model 3 that costs a modest $35,000 is in for the benefit.

Now it is up to Tesla Motors Inc (NASDAQ:TSLA) to ramp up production to grab the golden opportunity in Germany.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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