President-elect Trump is reportedly considering rolling back the Biden administration’s credit for electric vehicles — a move that experts say will have disparate impacts across the auto industry.
President Biden implemented a tax credit of up to $7,500 to incentivize the purchase of environmentally friendly vehicles. However, sources familiar with the matter told Reuters that Trump plans to eliminate the tax break as part of his sweep of Biden’s climate agenda.
While the decision is still debated among oil and energy advocates, one group that promotes public policy on behalf of the natural gas industry noted that behind the scenes, auto groups and consumers could feel relieved if the electric vehicle credit is eliminated.
“Losing $70,000 on an electric car is not a winning business model, and American automakers know it,” said Tim Stewart, president of the American Oil and Gas Association. Stewart said eliminating the tax credit for electric vehicles gives members of the auto industry the opportunity to return to traditional production lines.
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Tesla cars stand in the parking lot of a dealership on June 27, 2022, in Corte Madera, California. (Justin Sullivan/Getty Images)
“If I were CEO, I would be relieved to have a reason to shift production lines back to traditional models and invest in new hybrid technologies,” Stewart told Fox News Digital. “The EV tax credit was the only way to entice consumers to buy something they didn’t really want, but were told by Biden’s people they had to buy.”
“With the tax break ending and Biden’s onerous regulatory mandates lifted, the new administration provides the exit path that American producers really hoped for, and American consumers really wanted.”
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However, supporters of the tax credit, such as Energy Secretary Jennifer Granholm — and those who advocate for the shift to electric vehicles — say eliminating it would make the United States less competitive in the industry.
“The auto industry is investing billions of dollars in electric vehicle batteries and manufacturing them in the U.S.,” said Ingrid Malmgren, senior policy director at Plug In America. “Repealing the tax credit will hurt the U.S. auto industry and make U.S. manufacturers less competitive globally.” , a Los Angeles-based non-profit organization advocating the transition to electric vehicles.
Experts say eliminating the tax break could have different impacts across the auto industry.
Elon Musk speaks during America’s Town Hall PAC on October 26, 2024, in Lancaster, Pennsylvania. (Samuel Corum/Getty Images)
One of Trump’s staunchest allies, Tesla CEO Elon Musk, revealed in July that he supports eliminating the credit. “Abolish government subsidies, this will only help Tesla,” Musk said in a message to X.
Analysts point out that financially sound companies, like Tesla, could benefit if the playing field for electric vehicles is narrowed, while small companies that rely on the tax credit for consumer affordability could face setbacks.
“Tesla has a significant cost advantage in electric vehicles,” said David Weston, an analyst at financial services firm Morningstar Inc, according to a report by CPA Practicing Advisor. “Getting rid of that tax credit wouldn’t necessarily hurt them.”
Dan Ives, a senior equity research analyst covering the technology sector at Wedbush Securities with a focus on electric vehicles, conducted a review of the market impact on Tesla if the EV credit were removed.
“While this is an obvious negative for the electric vehicle industry at first glance and will particularly hurt GM, Ford, Stellantis, and Rivian…on the flip side, we view this as a net upside move for Tesla and Musk over time.” Ive said in a report on Tesla. “We expect Musk to have a big seat at the table as these electric vehicle discussions take place within the Trump transition team.”
Electric car at charging station. (Kurt “CyberGuy” Knutson)
“Consistent with our thoughts over the past few weeks, Tesla has unparalleled scale and scope, and while losing the EV tax credit may also hurt some margin demand in the US, this will enable Tesla to further fend off competition from the market,” Ives added. “Detroit as a price/range/range is apples to oranges compared to the rest of the auto industry once the EV tax credit goes away.”
Ive also said that removing the credit could slow the shift toward electric vehicles in Detroit, specifically.
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During his campaign, Trump highlighted his intention to target Biden’s clean energy initiatives, such as his pledge to “repeal the electric vehicle mandate.”
