President-elect Donald Trump’s transition team is planning to kill the $7,500 consumer tax credit for electric-vehicle purchases as part of broader tax-reform legislation, two sources with direct knowledge of the matter told Reuters.
Ending the tax credit could have grave implications for an already stalling U.S. EV transition. And yet representatives of Tesla – by far the nation’s largest EV seller – have told a Trump-transition committee they support ending the subsidy, said the two sources, who spoke on condition of anonymity.
Elon Musk, one of Trump’s biggest backers and the world’s richest person, said earlier this year that killing the subsidy might slightly hurt Tesla sales but would devastate its U.S. EV competitors, which include legacy automakers such as General Motors.
Shares of Tesla fell 5.5% to $311.77 in afternoon trading on Thursday.
Repealing the subsidy, which has been a signature measure of President Joe Biden’s Inflation Reduction Act (IRA), is being discussed in meetings by an energy-policy transition team led by billionaire oilman Harold Hamm, founder of Continental Resources, and North Dakota Governor Doug Burgum, the two sources said.
The group has had several meetings since Trump’s Nov. 5 election victory, including some at his Florida Mar-a-Lago club, where Tesla chief executive Elon Musk has also spent considerable time since the election. Representatives of Tesla, GM, Ford, Stellantis and the Trump transition did not immediately respond to requests for comment.
The Alliance for Automotive Innovation, a trade group representing nearly all major automakers besides Tesla, also did not immediately respond. The alliance last month in an Oct. 15 letter urged Congress to retain the EV tax credits, calling them “critical to cementing the U.S. as a global leader in the future of automotive technology and manufacturing.”
Trump repeatedly pledged to end Biden’s “EV mandate” on the campaign trail, without spelling out specific targeted policies. The energy-focused transition team has determined that some of the clean-energy policies in Biden’s IRA will be tough to roll back given that the programs have already started allocating money, including to Republican-dominated states where the programs are popular, the sources said.
Trump’s energy transition team views the consumer EV credit as an easy target, believing that eliminating it would get broad consensus in a Republican-controlled Congress as part of a larger tax-reform bill. Trump needs the cost savings from killing the credit to help pay for the extension of his trillions of dollars in tax cuts that are set to expire early in his term, the two sources said. Congressional Republicans are set to take up the broader tax measure as one of their first actions.
Members of the energy transition team expect the Republican Congress will deploy a legislative measure known as reconciliation to avoid relying on Democratic votes. Biden used the same tactic to get the IRA bill passed. Killing EV tax credits is strongly supported by Hamm, a long-time Trump supporter, along with most of the broader oil-and-gas industry.
The president-elect promised before the election to boost U.S. oil production even as it has hit record highs and to roll back President Biden’s costly clean energy initiatives, which in addition to the EV credit include subsidies for wind and solar power and the mass production of hydrogen.
Why Tesla could benefit
Tesla has over the years been the biggest beneficiary of EV tax credits like the one in Biden’s IRA legislation, along with similar credits that preceded it. And yet it now may stand to gain from killing the subsidy because that could hurt rising EV competitors more than Tesla.
Musk himself pointed out as much in a July earnings call when asked about the possibility of losing the subsidy, along with battery-production tax credits, under a Trump administration.
Tesla had a market share of just under half of all electric vehicles sold in the third quarter of this year, according to data from Cox Automotive. Other automakers with notable U.S. EV sales such as GM, Ford and Hyundai, individually trail far behind. But Tesla’s U.S. EV rivals collectively have in recent years steadily eroded its market share, which exceeded 80% in the first quarter of 2020
