Tesla Stock Drops 7% After Trump Calls for Probe into Subsidies

Tesla's stock experienced a significant decline of over 7% during the U.S. night trading session. The drop came after U.S. President Donald Trump called for a government probe into the subsidies received by Tesla CEO Elon Musk's company. Trump has been vocal about his opposition to renewable energy tax credits, labeling them as a scam and advocating for an expansion in the domestic production of fossil fuels. This stance has led to a contentious debate within the Senate, where a massive tax and spending package is being considered. The package includes a new tax on future solar and wind projects, as well as the phasing out of subsidies for these renewable energy sources by 2027.

The proposed changes have raised concerns within the clean energy industry, with some analysts warning that the elimination of subsidies could lead to higher costs and potential cancellations of future projects. The new tax would apply to wind and solar projects completed after 2027 if a certain percentage of their components come from China, the main supplier of nearly every component from critical minerals to solar panels. The subsidies for wind and solar power, which were put in place to help spur development of renewable energy creation like wind and solar farms, would also be phased out by 2027. This rapid winding down of one of the central pieces of Democrats’ 2022 Inflation Reduction Act has fueled concerns from the clean energy industry about slowing or stopping production on new projects or manufacturing facilities that were planned to count on the subsidies.

Wind and solar energy are the fastest-growing source of new electricity in the U.S. and account for a majority of new electricity production capacity that will be completed this year. Future projects may be at risk of being canceled or coming in at much higher costs without the subsidies, increases that are likely to be passed onto consumers in the form of higher utility bills. Tesla CEO Elon Musk has also railed against the provision as “utterly insane and destructive.” Musk’s electric vehicle company benefits from many of the tax credits and subsidies available to Americans who buy electric cars and solar panels. Musk wrote in a post on X, “The latest Senate draft bill will destroy millions of jobs in America and cause immense strategic harm to our country! It gives handouts to industries of the past while severely damaging industries of the future.”

A handful of GOP senators were planning to introduce amendments during Monday’s Senate voting marathon to water down some of the provisions to protect investments in renewable energy sources but those amendments face an uncertain fate. Wind and solar projects are some of the fastest ways to meet growing demand for electricity with shorter timeframes to build and be attached to the grid. Nuclear plants take years to build; companies are not investing in new coal plants due to expensive costs to build them and there is a years-long backlog for natural gas turbines. The subsidies in the Inflation Reduction Act, along with a less restrictive regulatory environment, has sparked a boom in solar and wind projects in Republican-leaning states with a huge fossil fuel presence like Texas and Oklahoma that are now among the nation’s leaders in renewable energy.

Power companies will likely continue to invest in wind and solar projects due to lower costs and quicker timeframes to start generating electricity compared to other means, but the loss of subsidies and the additional tax will mean higher prices for it as expenses get passed onto consumers, experts say.