Trump may end the $7,500 EV tax credit. Elon Musk and Tesla would reap the rewards
CNN
The $7,500 tax credit for buyers of electric vehicles could be vanishing early in the new Trump administration, but that might actually be good news for Tesla and its CEO Elon Musk, one of President-elect Donald Trump’s most prominent backers.
The $7,500 tax credit for buyers of electric vehicles could be vanishing early in the new Trump administration, but that might actually be good news for Tesla and its CEO Elon Musk, one of President-elect Donald Trump’s most prominent backers. While the US tax credit goes to EV buyers, not to the automakers themselves, it allows higher pricing for EVs as they compete with traditional gasoline-powered cars. When an earlier version of the tax credit phased out several years ago, Tesla was forced to cut prices on its vehicles by roughly half of the amount of the credit its buyers were no longer getting. Tesla, the world’s largest maker of EVs, is the only automaker making a profit on its US EV sales. Legacy automakers such as General Motors and Ford admit they are losing money on every EV they sell, partly because they are selling only a fraction of Tesla’s EV volume. When Tesla sold a relatively small number of EVs back in the last decade, it also lost money – but it is now among the most profitable automakers. So if the EV tax credit goes away, the price of all EVs might come down. But that would only reduce Tesla profits, not increase losses the way it might at established automakers trying to get into the market. Some of those automakers might even pull back on their EV production and sales in order to limit the losses, which would mean less competition among EV buyers for Tesla. Even with the EV tax credit in place, Tesla and Musk have used this greater profitability to cut prices on his EVs in order to support demand in the face of greater competition and to put pressure on his established automaker rivals. Musk signaled during the campaign that he would support ending the EV tax credit, even if raised the cost of Tesla purchases for American buyers.
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