Disclosure: The author of this report has no position in Tesla Inc. (NASDAQ:TSLA) and a long position in General Motors Company (NYSE:GM). Positions can change at any time without notice.
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In what appears to be a move crafted to avoid providing incentives for Tesla vehicles, the Canadian Government announced, in its 2019 Budget, a federal purchase incentive of up to $5,000 for electric battery or hydrogen fuel cell vehicles with a manufacturer’s suggested retail price of less than $45,000. The current starting price for the Tesla Model 3 in Canada is $47,600, while competitors such as the Chevy Bolt, Nissan Leaf, and Hyundai Ioniq Electric fall just below the $45,000 mark.
The Government of Canada has allocated $300 million over three years for this program — an amount which could fund incentives on 20,000 vehicles at the maximum $5,000 level. We think Tesla will be loathe to miss out on this number of potential vehicle sales. We therefore believe Tesla will take steps to lower the Model 3 base price below the $45,000 threshold – perhaps by software limiting vehicle range with the expectation that users will upgrade to a longer range after taking possession of their vehicle. It will be interesting to watch how this plays out over the coming months.
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