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Tesla loses US subsidies as it hits 200,000 sales mark

James Titcomb
Tesla has sold 200,000 cars in the US - REUTERS

Tesla has hit a speed bump that will cut subsidies for customers buying its electric vehicles in the US, after Elon Musk’s carmaker hit a milestone of 200,000 sales.

The US government subsidises purchases of electric cars with tax credits of up to $7,500 (£5,700), which apply to all of Tesla’s cars.

However, under changes to subsidies for electric cars introduced last year, the support is gradually phased out after a company has sold 200,000 vehicles. As of next January, subsidies will be cut in half before being phased out completely a year later.

Tesla is the first car manufacturer to hit the threshold in the US, and the end of subsidies could slow sales as the company ramps up production of the Model 3, its mass-market vehicle.

The company still has a backlog of hundreds of thousands of Model 3 orders, having struggled to hit production targets since the car went on sale a year ago. However, the company losing subsidies will make electric cars from rivals cheaper, at least until they hit the 200,000 mark.

Tesla Model 3 in pictures

US subsidies for electric cars were introduced in 2009 but limited by the government last year, amid predictions that electric vehicles will become more cost efficient and not need intervention to support.

Tesla has recently boosted production of its Model 3 car, managing to finally hit a target of 5,000 vehicles a week at the end of June.

Bloomberg reported that the company had gone to extreme lengths to hit manufacturing targets, including handing out free Red Bull energy drinks to workers and keeping production going even when raw sewage was spilled on the floor.

A Tesla spokesman said that no such incident was identified and that a plumbing issue related to a factory restroom had been resolved immediately.