President-elect Donald Trump’s transition team is working to eliminate the $7,500 consumer tax credit for electric vehicle (EV) purchases as part of broader tax reforms, according to sources familiar with the matter. The proposed repeal could slow the U.S. transition to electric vehicles, which is already facing challenges. However, representatives from Tesla, the largest U.S. EV maker, have expressed support for ending the subsidy, sources said.
Tesla CEO Elon Musk, a major Trump supporter, stated in July that removing the credit could hurt Tesla sales slightly but would be “devastating” to competitors, such as General Motors (GM). Following the news, Tesla’s stock dropped nearly 6%, while shares of smaller EV rivals like Rivian and Lucid also fell sharply.
The proposed repeal of the tax credit, part of President Biden’s Inflation Reduction Act (IRA), is under discussion by a transition team led by oil magnate Harold Hamm and North Dakota Governor Doug Burgum. The team has met several times since Trump’s election victory, including at Mar-a-Lago, with Musk present at some meetings.
The Trump transition team has not publicly commented on the fate of the credit but emphasized that Trump intends to fulfill campaign promises. Trump had previously campaigned on ending Biden’s “EV mandate” but did not specify the policies he would target. Sources say the transition team sees repealing the EV tax credit as an easy win in the Republican-controlled Congress.
The credit repeal is seen as a way to help fund tax cuts from Trump’s first term that are set to expire soon. The Republican-led Congress is expected to address the broader tax package using reconciliation, bypassing the need for Democratic votes. The oil and gas industry, including Trump ally Harold Hamm, strongly supports ending the EV credit, as part of a broader agenda to increase U.S. oil production and roll back Biden’s clean-energy policies.
Tesla May Benefit from Ending the Credit
While the tax credit has been a significant benefit to Tesla, the company may stand to gain if it is removed, as the impact would likely hurt rising EV competitors more than Tesla. Musk acknowledged in July that ending the subsidy might ultimately “benefit Tesla.” Tesla’s market share in the U.S. EV market was just under 50% in the third quarter, despite increasing competition from automakers like GM, Ford, and Hyundai.
Tesla investors believe the company can absorb the loss of the tax credit due to its lower production costs and engineering capabilities. “Eliminating the subsidy means competitors can’t compete on cost,” said Nicholas Mersch, a portfolio manager at Purpose Investments. Musk may also benefit from policies that Trump is expected to support, such as trade barriers that block Chinese EV imports. Chinese EV makers like BYD have gained significant market share, aided by government subsidies. Tesla’s U.S. market share has been slipping, but it remains a dominant player in China, where it faces competition from local EV makers.
Detroit Automakers Face Challenges Without Subsidies
The proposed end to the EV tax credit is causing concern among U.S. automakers, particularly those in Detroit. Companies like GM, Ford, and Stellantis are still working to ramp up EV production and cut costs. Ford, which is expecting significant losses on its EV operations this year, has relied on tax credits to support consumer demand for its electric vehicles, including the F-150 Lightning pickup.
Without the tax credit, EVs may become less affordable for price-conscious consumers, hampering the Detroit Three’s efforts to transition to electric vehicles. GM, which has received significant manufacturing credits under the IRA, has warned that losing the tax credit could hinder its progress toward reducing annual EV losses. The United Auto Workers (UAW), which represents workers at GM, Ford, and Stellantis, has supported Biden’s pro-EV policies, including the $7,500 credit. UAW president Shawn Fain recently criticized Trump’s stance, warning that eliminating the tax credit could threaten jobs in the auto industry.
As U.S. automakers prepare for potential changes to EV policies under Trump, the future of the EV tax credit remains uncertain, with significant implications for both the industry and consumers.
