President-elect Donald Trump is considering ending the $7,500 tax credit for electric vehicle (EV) buyers. This move could actually benefit Tesla and its CEO, Elon Musk. The tax credit allows for higher pricing of EVs, making them more competitive with gas-powered cars.
When a previous version of the credit phased out, Tesla had to cut prices on its vehicles by about half the amount of the lost credit. Tesla is currently profitable on its US EV sales, while other automakers like General Motors and Ford lose money on each EV sold. If the tax credit ends, it could lead to lower prices for all EVs.
However, this would likely only reduce Tesla’s profits rather than increase losses, as might happen for other automakers trying to enter the market. Some traditional automakers might even scale back their EV production and sales to limit losses, reducing competition for Tesla. Musk has indicated support for ending the EV tax credit, even if it raises costs for American Tesla buyers.
On his social media platform X, Musk stated, “Take away the subsidies, it will only help Tesla.”
Other automakers want to keep the tax credit. The Alliance for Automotive Innovation, representing major global automakers other than Tesla, urged Congress to continue the credit.
Trump eyes EV tax policy shift
They argued that US manufacturers rely on it to compete with advancements by Chinese automakers. Global automakers have invested billions transitioning from gas-powered cars to EVs. With more EV models introduced by legacy automakers recently, Tesla’s sales have slowed.
Competition from Chinese EV makers in China and Europe has also increased. Trump promised to kill what he called President Biden’s “EV mandate,” though no such mandate exists in federal law. The Inflation Reduction Act under Biden restored the tax credit for many EV purchases and provided low-interest loans for automakers building EV and battery factories.
Trump’s transition team is reportedly planning to eliminate the $7,500 credit as part of broader tax reform, a move supported by Tesla representatives. Though unconfirmed, shares of Tesla and other automakers fell after the report. Several analysts believe ending the credit would benefit Tesla.
Garrett Nelson of CFRA Research wrote that it would make competing EV models “uneconomic” and raised his recommendation on Tesla’s stock to “buy” from “hold.” Dan Ives of Wedbush Securities noted that while losing the credit could hurt some US demand for Tesla, it would enable the company to fend off competition from Detroit. The possible removal of the EV tax credit under Trump could sharpen Tesla’s competitive edge, further establishing its dominance in the EV market.
Rashan is a seasoned technology journalist and visionary leader serving as the Editor-in-Chief of DevX.com, a leading online publication focused on software development, programming languages, and emerging technologies. With his deep expertise in the tech industry and her passion for empowering developers, Rashan has transformed DevX.com into a vibrant hub of knowledge and innovation. Reach out to Rashan at [email protected]
