Will Donald Trump try to kill the Biden administration’s $7,500 electric vehicle rebate? Will Elon Musk be applauding?
When he was campaigning, Trump made an appeal to legacy U.S. autoworkers by slamming electric vehicles. At his July speech accepting the Republican Party nomination, Trump pledged to “end the electric vehicle mandate on day one.” There is, of course, no EV mandate, but a series of policy and tax provisions promoting and subsidizing electric vehicles.
During the campaign Trump denigrated electric cars across the board. He was critical of the EV tax credit, which has served to lower the cost by offering an immediate tax credit, which the auto companies now apply directly to the final price of the car.
Then he and Tesla EV magnate Elon Musk became pals and Trump started saying good things about EVs. Tesla is the only U.S. automaker that is not unionized.
Later in July, Trump told a rally in Grand Rapids, Mich., “I’m constantly talking about electric vehicles but I don’t mean I’m against them. I’m totally for them….I’ve driven them and they are incredible, but they’re not for everybody.”
Musk’s Tesla is by far the most successful maker and marketer of electric vehicles in the U.S., although lately General Motors has been outselling the Muskmobiles. Legacy automakers long dependent on internal combustion engines have been slow to embrace EVs, but that is changing rapidly. China’s BYD has developed a world-class EV and is outselling Tesla everywhere outside of the U.S.
Now, the Reuters news service, in what it describes as an “exclusive,” reports, “Incoming U.S. President Donald Trump’s transition team is recommending sweeping changes to cut off support for electric vehicles and charging stations and to strengthen measures blocking cars, components and battery materials from China, according to a document seen by Reuters.” The Trump transition team plan specifically calls for ending the $7,500 tax credit.
On the other hand, the EV tax credit and other Biden initiatives on EV charging infrastructure and battery technology and manufacturing do not appear in the Heritage Foundation’s Project 2025. That document has offered guidance to the incoming administration on almost everything in the federal government, including the Treasury Department, which administers most of Biden’s Inflation Reduction Act and its subsidies.
According to the Reuters account, “The transition-team plan would redirect money now flowing to building charging stations and making EVs affordable into national-defense priorities, including securing China-free supplies of batteries and the critical minerals to build them.” The document states, “While batteries, minerals and other EV components are critical to defense production, EVs and charging stations are not.”
While it might seem that Trump is flouting his political pal Musk, CNN explains how ending the EV tax credit would benefit Tesla. The key is that Tesla makes a profit on its EVs, while its competitors, with much lower sales volumes, lose money. To keep the final price to customers the same, Ford, GM, VW, Hyundai, etc., would incur greater losses.
“Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!” — Elon Musk
Tesla, on the other hand, would see its profits decline but it would still be running in the black. According to CNN, “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.” In July, Musk tweeted, “Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!”
Musk’s position is not that of the rest of the U.S. auto industry, which has a considerably broader economic footprint than Tesla. In a Nov. 22 letter to Trump, the Alliance for Automotive Innovation, the industry’s Washington trade group (which does not include Tesla as a member), wrote, “Provisions in the tax code (including the 2017 Tax Cuts and Jobs Act) support the development of next-generation automotive technologies, including EVs, in the U.S. These incentives have fueled investment in domestic EV and battery manufacturing and increased good-paying jobs in automotive communities across the industrial base. The incentives help ensure the U.S. continues to lead in manufacturing critical to our national and economic security. Alliance for Automotive Innovation urges your administration to preserve auto-related provisions in the current tax code.”
There are also geopolitical reasons Trump may want to conveniently forget his day-one EV pledge. A recent Bloomberg analysis found, “Republicans represent congressional districts with 19 of 25 major automaker battery and EV assembly plants in operation or under construction…. Most of the remaining facilities in Democratic Party-represented districts are in states which supported Trump in November’s election.”
–Kennedy Maize
The Quad Report
