A rumor that "the new US government plans to cancel the tax incentives for buying electric vehicles" caused a sharp drop in the US electric vehicle sector.
In response to the rumor, Tesla CEO Musk stated on social media: "End all (US) government subsidies, including subsidies for electric vehicles, oil and."
The above rumors caused the US electric vehicle sector to fall sharply on Thursday. Among them, Tesla fell 14.3%, Nikola fell 22.76%, and Tesla also fell 5.77%. At the same time, the share prices of Ford and GM did not fluctuate significantly. After the opening of the US stock market on Friday, the electric vehicle sector stabilized. As of press time, Nikola rose more than 3%, Tesla rose more than 2%, but Rivian still fell more than 3%.
Trump team plans to cancel tax incentives for buying electric vehicles
According to Reuters, the transition team of the newly elected US President Trump is planning to cancel the $7,500 consumer tax credit for buying electric vehicles as part of a broader tax reform legislation.
The energy policy transition team, led by billionaire oilman Harold Hamm, founder of Continental Resources, and North Dakota Governor Doug Burgum, has met to discuss the abolition of subsidies. Since Trump won the election on November 5, the team has held several meetings at Mar-a-Lago Club in Florida and other places.
The Alliance for Automotive Innovation has not yet responded to the rumor. The alliance is a trade organization representing almost all major automakers except Tesla. On October 15, the alliance urged Congress to retain electric vehicle tax credits in an open letter, saying they are "critical to consolidating the United States as a global leader in future automotive technology and manufacturing."
The tax subsidy has been seen as a signature measure of the current President Biden's Inflation Reduction Act (IRA).
Trump repeatedly promised to end Biden's "electric vehicle privilege" during the campaign, but did not specify specific targeted policies.
If the tax incentive is eventually canceled, it will have a significant impact on the electrification transformation of the US auto industry. But one of Trump's biggest supporters, Elon Musk, the world's richest man, said earlier this year that canceling subsidies might slightly hurt Tesla's sales, but would destroy its U.S. electric vehicle competitors, including.
Is traditional energy going to return to the throne?
In August 2022, the current U.S. President Biden signed the Inflation Reduction Act (IRA), the largest climate law in U.S. history, which plans to invest $369 billion in new energy and climate change projects and provide subsidies and tax incentives for a range of green industrial products.
The Inflation Reduction Act stipulates that if a certain proportion of key battery minerals in electric vehicles purchased in the United States come from the United States or its free trade partners, consumers can get up to $7,500 in tax credits.
But Trump has been emphasizing since the beginning of his campaign that relevant subsidies for related new energy industries will be canceled. He promised to increase U.S. oil production even though U.S. oil production has hit a record high and cancel Biden's expensive plans. In addition to electric vehicle incentives, these plans also include subsidies for wind and solar energy and large-scale production of hydrogen.
Trump's claims have also been strongly supported by his long-time supporter Hamm and most people in the broader oil and gas industry. But the team also said that some clean energy policies in the Inflation Reduction Act will be difficult to overturn because these projects have already been funded and are even popular in some Republican-dominated states.
But electric vehicle tax incentives can be easily abolished. They believe that as part of a larger tax reform, the abolition of this policy will be widely agreed upon in the Republican-controlled Congress. More importantly, Trump won a second presidential term, and his Republican Party will also control both the Senate and the House of Representatives. This makes it easier for amendments to relevant bills to be passed in Congress.
Can Tesla really make a profit?
Rumors of "canceling electric vehicle tax incentives" caused the U.S. electric vehicle sector to fall sharply on Thursday. Among them, Rivian fell 14.3%, Nikola fell 22.76%, and Tesla also fell 5.77%. At the same time, Ford and GM's stock prices did not fluctuate significantly. After the opening of the U.S. stock market on Friday, the electric vehicle sector stabilized. As of press time, Nikola rose more than 3%, Tesla rose more than 2%, but Rivian still fell more than 3%.
In fact, Tesla has always been considered the biggest beneficiary of Biden's new energy priority.
But removing the subsidy policy now could benefit Tesla because it could hurt rising EV competitors more than Tesla. Musk himself made this point in a July earnings call, saying that losing subsidies during the Trump administration "might benefit Tesla in the long run."
While other automakers with sizable EV sales, such as GM, Ford and Hyundai, are far behind, their market share is gradually increasing. Tesla's market share exceeded 80% in the first quarter of 2020, but in the third quarter of this year, Tesla accounted for less than half of U.S. EV sales.
Nicholas Mersch, a portfolio manager at Tesla investor Purpose Investments, said Tesla can withstand the sales hit that the loss of subsidies may bring because the automaker's "engineering and manufacturing strength" has reduced its costs. "Removing subsidies means that competitors can't catch up and can't compete on cost," Mersch said.
But given that Tesla's average selling price is lower than its peers, the tax break could still have an impact on Tesla's revenue and profit margins.
According to Kelley Blue Book, a professional car evaluation company in the United States, the starting price of Model 3 in the United States is about $42,000, which is much lower than the average price of electric vehicles in the United States. In October, the average price of electric vehicles in the United States stabilized at nearly $57,000. In the third quarter of 2024, Tesla's pre-tax profit margin was 18%, much higher than the industry average of about 9%.