Tesla could soon face a major shakeup in the electric vehicle (EV) market as President-elect Donald Trump’s team considers removing the $7,500 EV tax credit, according to Reuters.
This credit, which makes electric cars more affordable, has been a key part of the U.S. EV market. Removing it could impact sales and hurt companies trying to catch up to Tesla in the EV space.
Elon Musk, Tesla’s CEO, and one of Trump’s well-known supporters, reportedly supports ending the tax credit, even though it could hurt some Tesla sales. Musk has said that without the credit, other U.S. automakers will struggle more to sell EVs than Tesla, whose brand has a solid lead in the EV market.
In the third quarter of this year, Tesla held nearly 50% of U.S. EV sales, with its competitors, like GM and Ford, trailing far behind.
This proposed change to the tax credit aligns with Trump’s pledge to roll back President Joe Biden’s clean energy initiatives. These include incentives for EVs, wind and solar power, and hydrogen production, which Biden included in the Inflation Reduction Act. Trump’s energy policy team, led by oil industry figures, believes that cutting the EV tax credit is an easy win that could get strong support from a Republican-led Congress. Removing the credit would also help Trump fund extensions of his tax cuts.
Tesla, though, could benefit in a roundabout way. Musk noted earlier this year that while Tesla’s sales might see a minor dip without the credit, the impact on its U.S. competitors would be far worse. That could make Tesla’s market position even stronger as other automakers struggle to grow their EV offerings without the tax break.
Some automakers, including groups like the Alliance for Automotive Innovation, are urging Congress to keep the EV credits, calling them essential for the U.S. to lead in automotive technology.