Tesla and other EV stocks plummet as Trump plans to kill Biden's EV tax credit
1min read What Happening?Tesla stock falling nearly 6%, and all EV stocks were fall.
President-elect Donald Trump's transition team is reportedly planning to eliminate the $7,500 consumer tax credit for electric vehicle purchases as part of broader tax reform, according to two sources cited by Reuters. Following this news, the stock prices of EV manufacturers like Tesla and Rivian, along with battery makers, saw significant declines.
Ending this tax credit could severely impact the trajectory of the EV industry in the U.S. Surprisingly, however, two sources revealed that Tesla, the world's largest EV producer, actually supports ending the subsidy.
Why would Tesla back such a move? Elon Musk has previously explained this. As early as July, Musk stated that while removing the EV credit might hurt Tesla's sales, it would be devastating for its U.S. competitors. With competitors struggling, Tesla would naturally capture more market share. Nicholas Mersch, a portfolio manager at Purpose Investments and a Tesla investor, commented that Tesla could endure a potential sales dip from losing subsidies because the company's "engineering and manufacturing prowess reduces its costs.
"Without the subsidy, competitors can't catch up and won't be able to compete on costs, Mersch noted.
So, why does Trump's team want to cancel this subsidy?
It's a matter of saving money. During his campaign, Trump promised significant cuts to U.S. government spending. According to the two sources, the money saved from scrapping the credit could help fund the extension of tax cuts worth trillions from Trump's first term, which are set to expire soon. Congressional Republicans plan to prioritize a broader tax bill early on.
Trump's team views the EV tax credit as an easy target, believing its elimination would receive wide support in a Republican-controlled Congress. The Trump transition team did not comment on the EV tax credit's future but stated that the president-elect intends to fulfill his campaign promises.
What impact might the cancellation of these subsidies have on the U.S. EV industry?
The Alliance for Automotive Innovation appealed to Congress in an October 15 letter to preserve the EV tax credits, describing them as critical to cementing the U.S. as a global leader in future auto manufacturing.
UAW President Shawn Fain criticized Trump's intention to repeal the subsidies, warning that hundreds of thousands of auto industry jobs were at risk.