Big Tax Credits for Electric Semi Trucks

The Tesla 18-wheeler is eligible for a $40,000 tax credit. That makes it much cheaper to purchase and operate than a diesel truck.

Electric trucks like Tesla Semi will get up to $40,000 in incentives with new bill
https://electrek.co/2022/07/29/electric-trucks-tesla-semi-40…

intercst

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I’m not going to FA this post but I will from now on IF YOU KEEP POSTING ABOUT BILLS THAT HAVE NOT YET BEEN SIGNED INTO LAW. They have little chance of passage in unchanged form. So they are inherently political.

Stop!
I mean it!

Only count your chickens AFTER they have hatched.

Wendy

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WendyBG writes,

I’m not going to FA this post but I will from now on IF YOU KEEP POSTING ABOUT BILLS THAT HAVE NOT YET BEEN SIGNED INTO LAW. They have little chance of passage in unchanged form. So they are inherently political.

Stop!
I mean it!

Only count your chickens AFTER they have hatched.

That’s fine.

With the exit of many valuable contributors on the TMF boards and the decline in the quality of the content, I’ve been reevaluating whether it’s worth while to spend much time on TMF.

You’ll definitely been seeing less of me between now and when the last vestiges of the boards crater.

intercst

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The Tesla 18-wheeler is eligible for a $40,000 tax credit. That makes it much cheaper to purchase and operate than a diesel truck.

Time for my periodic reminder of microeconomics.

A tax or a tax credit on any good is not going to be fully realized by either the buyer or the seller. Each will see a part of the benefit (or cost). How that is split will depend entirely on the shape of the demand and supply curves.

Let’s take an extreme end, which might be pretty close to a Tesla 18-wheeler tractor. At least for a while, the supply will be limited. As much as Tesla might want to make more, and as much as buyers might want to buy more, there will only be so many available.

We normally think of supply curves as sloping up, with higher prices resulting in more production. But at some point fairly quickly along the curve, it will hit the limit of supply. It will become a vertical line. It doesn’t matter how much more customers are willing to pay, the supply will be a fixed number. Adding a tax credit on at that point just puts money into the maker’s pocket. There is still a limit to what customers will pay, but that limit is increased by the amount of the tax credit. A customer will say that he is willing to pay “x” for the truck. If a tax credit comes along, the customer is now willing to pay x plus the credit amount. And with an effectively vertical supply curve in the relevant range, all of the credit will end up with the manufacturer. So the net cost to purchase will not be changed by the credit.

With a more normal supply curve, the portion of the credit going to the manufacturer is roughly the slope of the supply curve. In that case, the buyers will be a bit better off, as they will be able to buy the good at a lower price than they would previously. But it’s still not lower by the full amount of the credit.

–Peter

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