Musk Backs Trump’s Plan to End $7,500 EV Credit: ‘It Will Only Help Tesla’
By Jake Beardslee ·
November 16, 2024
The longstanding federal incentive of a $7,500 tax credit for electric vehicle (EV) purchasers is on the verge of being eliminated, a move that could significantly impact traditional automakers. According to a Reuters report on Thursday, President-elect Donald Trump is contemplating the removal of this tax credit early in his administration. Jasper Colt / USA TODAY NETWORK via Imagn Images
While this policy shift poses challenges for legacy automakers such as General Motors and Ford, Tesla stands to gain. The company is currently the only U.S. automaker profitable from EV sales, benefiting from economies of scale that its competitors have yet to achieve. Trevor Hughes / USA TODAY NETWORK / USA TODAY NETWORK via Imagn Images
Elon Musk, Tesla’s CEO and a prominent Trump supporter who has recently joined the Trump administration as co-chair of the Department of Government Efficiency, expressed Indifference towards the tax credit removal. He stated that eliminating the credits might be "slightly" detrimental in the short term but believes it could "probably actually help Tesla" in the long run. Jack Gruber / USA TODAY NETWORK / USA TODAY NETWORK via Imagn Images
Tesla has historically benefited from government subsidies, including a $465 million loan from the Department of Energy in 2010, which was repaid in 2013. Additionally, the company has received nearly $3 billion from EV buyer credits. Musk commented on X, saying, "Take away the subsidies. It will only help Tesla," and advocated for removing subsidies across all industries. ANDREW DOLPH/TIMES-REPORTER / USA TODAY NETWORK via Imagn Images
Tesla's competitive edge is further highlighted by its manufacturing efficiency and scale, resulting in higher profit margins compared to other automakers. In the third quarter of 2024, Tesla reported a pre-tax profit margin of 18%, double the industry average. The company’s Model 3 is priced over $14,000 cheaper than the average EV, according to Kelly Blue Book data. With nearly half of the approximately 600,000 EVs sold in the U.S. during the first half of 2023 being Tesla models, the company maintains a substantial lead over rivals like Ford, which holds just over 7% of EV sales. Peter Ackerman / USA TODAY NETWORK
Despite the potential removal of federal incentives, Tesla may not need to reduce vehicle prices as aggressively as its competitors, who are already struggling with profitability in their EV lines. This advantage allows Tesla to sustain its market dominance even if EV prices generally decrease due to the loss of tax credits. Sam Upshaw Jr./Courier Journal / USA TODAY NETWORK
Public opinion on EV tax credits appears lukewarm, with only 9% of Americans owning or leasing an EV and 40% unaware of the tax credit’s existence, according to a BlueLab Analytics poll. Additionally, several Democratic-led states have set their own EV mandates, requiring a significant percentage of new vehicle sales to be electric in the coming years, which could complicate the national landscape for automakers. Nancy Anderson/Shopper News / USA TODAY NETWORK via Imagn Images
