Tesla's Crossroads: Fiscal Policy Shifts and Leadership Tensions Signal a Sell in EV Stocks

The electric vehicle (EV) sector is at a pivotal inflection point. Elon Musk's vocal criticism of President Trump's newly proposed “One Big, Beautiful Bill Act” has exposed deepening fissures between Tesla's ambitions and the federal policies now undermining its growth narrative. This legislation, which slashes EV incentives while expanding fossil fuel subsidies, marks a seismic shift in U.S. energy policy—one that could redefine stock valuations for EV companies and create stark opportunities in legacy automakers and infrastructure plays.

The Tax Bill's EV Provisions: A Direct Assault on Tesla's Business Model

The bill's most immediate impact is the termination of the $7,500 federal EV tax credit and the imposition of a $250 annual registration fee on electric vehicle owners. These measures, paired with accelerated phase-outs of clean energy tax credits, effectively reverse years of bipartisan support for EV adoption. For Tesla, which relies on tax credits to offset production costs and maintain pricing competitiveness, this is a financial body blow.

The market has already priced in some of this risk: Tesla's shares have underperformed the broader market by over 20% since January 2025 amid rumors of the bill's provisions. Musk's public frustration—framed as criticism of “inefficient government spending”—masks a deeper vulnerability: Tesla's declining profit margins and the rising cost of capital as its Model 3/Y dominance wanes.

Why Musk's Distant Relationship with Trump Matters

Musk's financial support for Trump's 2024 re-election campaign now looks like a miscalculation. The bill's provisions align with Trump's “Make America Win Again” mantra—favoring fossil fuels and traditional industries over green tech. Musk's Department of Government Efficiency (Doge) team, which once pushed for EV-friendly policies, is sidelined as the administration doubles down on coal, oil, and gas subsidies. This leadership disconnect creates existential uncertainty for Tesla: Can it thrive in a policy environment that no longer prioritizes its vision?

The EV Sector's Valuation Crisis

The bill's fiscal math is even more troubling. The Congressional Budget Office estimates it will add $3.8 trillion to the national debt over a decade—funding border security, tax cuts for fossil fuels, and military spending while starving EV incentives. This debt-driven spending spree could trigger higher interest rates, raising borrowing costs for EV manufacturers already struggling with overcapacity and falling demand.

Where to Deploy Capital Instead

The bill's losers are EV stocks; its winners are legacy automakers and infrastructure plays. Consider:
1. Fossil Fuel-Friendly Automakers: Companies like Ford (F) and General Motors (GM), which derive 60-70% of profits from gas-powered trucks and SUVs, benefit from the bill's fossil fuel subsidies and relaxed emissions standards.
2. Infrastructure Plays: The bill's $500 billion allocation for roads, bridges, and ports—largely funded by EV fees and fossil fuel royalties—favors construction firms like Bechtel and materials giants like Vulcan Materials.
3. Nuclear and Natural Gas Utilities: The bill's carve-out for nuclear plants (allowed tax credits until 2028) and expanded drilling rights on public lands favor companies like NextEra Energy and ExxonMobil.

The Bottom Line: Sell EVs, Buy the Shift

The writing is on the wall. Tesla's valuation—still trading at 5x forward sales despite eroding margins—reflects outdated optimism about EV demand in a policy-hostile environment. The “One Big, Beautiful Bill Act” is no longer theoretical; it's a actionable signal to exit EV stocks and pivot to sectors that align with the administration's priorities. Investors ignoring this shift risk being left behind as capital floods into the next wave of winners: old-school energy, infrastructure, and the automakers that still drive America's economy.

Act now. The EV dream is over. The “Make America Win Again” rally is just beginning.