Tesla Magic Is Gone? US Registrations Drop 38% In August, 18% In Sept.

The Tesla Model 3 on display in Los Angeles, California. The popular Model 3s have driven more than 1 billion electric miles in record time. FREDERIC J. BROWN/AFP/Getty Images

Registrations of Tesla Inc. electric vehicles (EVs) in the United States in August and September plummeted sharply, again bringing to the fore the controversial problem of weak demand that plagued the company this same time in 2018.

Registrations include both sold and delivered EVs. Tesla doesn't consider its EVs sold unless it's been delivered to a customer.

Tesla registrations improved 93.3 percent year over year in July in the 22 states tracked by auto market intelligence firm Dominion Cross-Sell. Registrations in August, however, plummeted 38 percent from the same period in 2018. It then plunged 18.7 percent in September.

Analysts assert the sharp fall has something to do with the steep drop in the federal tax credits for all-electric and plug-in hybrid vehicles. This tax credit stood at $7,500 for all Tesla EVs from 2010 to 2018. As of July 1, 2019 until the end of this year, however, this tax credit has been slashed to $1,875.

"It doesn't surprise me," Philippe Houchois, managing director of automotive equity research at securities and investment banking firm, Jefferies Financial Group, told Fortune. "There was a step down in the Federal [electric vehicle] credit."

"I'm guessing that in July, they still had some leftover deliveries from the second quarter."

Dominion Cross-Sell said the sharp drop in Tesla EV registrations was most pronounced in the Model 3, the cheapest Tesla EV bandied about as everyman's EV by the company. July registrations for the Model 3 rose 136.1 percent year-on-year. In August, however, registrations plunged 40.3 percent and plunged some more by 16 percent in September.

The Model S shared the same fate as the Model 3. Its registrations dropped 12.8 percent in July year-on-year; 31.6 percent in August and 37.9 percent in September.

On the other hand, registrations of the Model X were up 17 percent in July, fell 4.1 percent in August and 16.7 percent in September.

The registration slowdown was at its sharpest in California, where Tesla sells most of its EVs in the U.S. California saw registrations in August plummet by a massive 60.1 percent to 3,737 EVs and by 26.8 percent to 4,667 in September.