The $7,500 tax credit for buyers of electric vehicles may be coming to an end early in the new Trump administration, potentially impacting the EV market. However, this development could actually benefit Tesla and its CEO Elon Musk, a prominent supporter of President-elect Donald Trump.
While the tax credit directly benefits EV buyers and not automakers, it has allowed for higher pricing of EVs as they compete with traditional gasoline-powered vehicles. In the past, when the tax credit phased out, Tesla had to reduce prices on its vehicles by a significant amount to offset the loss of the credit for buyers.
Tesla, as the world's largest EV maker, is the only automaker making a profit on its US EV sales. Legacy automakers like General Motors and Ford have admitted to losing money on each EV sold, partly due to lower sales volume compared to Tesla.
If the EV tax credit is eliminated, it could lead to a decrease in EV prices across the board. However, this would impact Tesla's profits rather than causing losses like it might for other automakers entering the EV market.
Despite the potential removal of the tax credit, Tesla and Musk have been able to maintain profitability by adjusting prices and staying competitive in the market. Musk has indicated support for ending the EV tax credit, believing it would ultimately benefit Tesla.
As Tesla faces increased competition from other automakers and Chinese EV manufacturers, its sales have slowed in recent years. Musk, who donated significantly to Trump's campaign, remains one of the wealthiest individuals globally.
While reports suggest that Trump's transition team plans to eliminate the tax credit as part of broader tax reform, Tesla has expressed support for this decision. Analysts believe that ending the credit could strengthen Tesla's position in the EV market, making competing models less economically viable.
Following the news, Tesla's stock prices fluctuated but showed signs of rebounding. Analysts foresee potential benefits for Tesla in terms of market dominance and approval for its self-driving vehicle plans.
Overall, the potential end of the EV tax credit could further solidify Tesla's competitive advantage in the EV industry, despite short-term challenges.
