When former President Donald Trump campaigned on the promise to end the $7,500 tax credit for electric vehicles, many people pointed out its new close ties with Tesla CEO Elon Musk as evidence that he wouldn’t actually act to deliberately harm America’s burgeoning electric vehicle sector.

But as with all things Musk, it’s not that simple. It never is.

Yesterday, the Trump transition team made headlines when sources said Reuters that he was already drawing up plans to kill creditand that Tesla representatives told the team they supported the decision. In other words, America’s largest electric vehicle maker is in favor of ending a subsidy that has so far helped generate millions in sales. (Tesla is no longer responding to media requests for comment.)

This is a confusing argument to make. US auto industry and related companies like battery makers are investing some 300 billion dollars in electric vehicle production aimed at giving America the tools to compete with a booming China, which has also heavily subsidized this transition.

But the current theory is that Tesla is the only American (and really only Western) automaker that is profitable and manufacturing electric vehicles at scale, so ending the tax credits would hurt competitors that are taking Tesla’s market share like General Motors, Ford, Hyundai and others. Musk has been saying this for a while; on his social media platform And during a July earnings callHe said ending the credit would be “devastating to our competitors,” but “in the long run it would probably help Tesla.”

That may depend on how long the “term” Musk is talking about these days. Unless you have blind and complete faith that its five-dimensional chess game will ultimately prevail, this is not good news for Tesla, and its so-called CEO may want to look into its own assessment before putting pressure in this direction.

Photo by: Tesla

Tesla’s financial results also take a hit here

There’s no denying that ending tax credits would hurt the entire electric vehicle industry. That’s why the U.S. auto industry’s main lobbying group is so opposed to the move, urging congressional Republicans to maintain the momentum. or risk losing to China. Certainly, Tesla has always been an exception in this area, even more so than other startups like Rivian and Lucid; Musk has long relied on the idea that it is a “technology company” rather than an automaker, which explains its sky-high valuation.

Yet, as countless critics have pointed out, Tesla has long depended on subsidies of all kinds. (The same goes for Musk’s other companies, including lucrative government contracts.) The electric and hybrid vehicle tax credit actually dates back to the George W. Bush administration. Save a few years to the end of the first Trump era and the beginning of President Joe Biden’s, before the Inflation Reduction Act took effect – when automakers would lose the initial credit after selling a certain number of cars – Tesla almost always benefited from these credits somehow.

As Tesla’s U.S. sales have fallen due to increased competition, potential backlash to Musk’s online presence and policies, and his aging lineup (more on that in a moment), she also benefited enormously from the IRA. Even though Tesla also implemented significant price reductions in 2023, these tax credits still helped propel it to over 650,000 sales in 2023:a 25% jump from the previous year. And even if not all current Tesla models are eligible due to where some of their batteries are made, it definitely helps move the metal.

Other types of grants are just as useful. It’s unclear which ones Musk actually wants to cut, but Tesla has accumulated billions of dollars over the years in regulatory credits: essentially, other automakers are buying credits from Tesla because they can’t meet targets themselves. strict emissions regulations. It is represented nearly $2 billion in revenue during each of the last two years. Does Musk also want to get rid of the system that is creating this situation? It’s not clear.

That doesn’t sound like much for an automaker that generated $96 billion in revenue over the past two years, but between that and the impact on sales, it adds up. So does the fact that Tesla once planned to be a key charging driver for the rest of the auto industry. Every U.S. electric vehicle manufacturer has opted for its plug type and has secured, or is working on, a deal to access its Tesla Supercharger network. An analyst I spoke to said this should mean an additional $20 billion for Tesla by 2030.

If the electric vehicle tax credit disappears and other automakers’ electricity sales fall, you can add that revenue to the tally, too.

The “future” of the company has not yet been proven

Photo by: InsideEVs

If you were to ask Musk in one word the real reason why he does this, I guess it would be “robotaxis.”

This era of Tesla is not banking on electric cars or competition with China, but on the idea that one day it will crack the code to fully autonomous driving. In theory, everyone will then want to flock to their cars, because driving yourself will be as outdated as owning a horse. (Indeed, that’s a large part of why Tesla implemented so many price cuts in 2023: to get as many people into its cars as possible. then bill Full Self-Driving subscriptions.)

But if that’s the plan, it has to be where Musk means “long term.” Autopilot and FSD have improved in recent years, but they are far from ready for truly autonomous, steering-wheel-free driving. Google’s Waymo robotaxi service has logged more than 25 million miles of driving without human intervention so far; Tesla recorded almost none. Even in the consumer automotive sector, there are technologies that automate driver assistance. better than Tesla can do in many scenarios since the automaker relies entirely on AI and cameras instead of advanced sensor suites.

Now that he’s close to Trump, so is Musk capitalize on the ability to break regulations which he believes are holding back autonomous vehicles while creating new ones to drive their growth. But again, this is a long-term strategy at best that isn’t validated by anything we’ve seen so far about Tesla’s current technology. And the company still has to sell cars in the meantime to finance this dream.

This doesn’t solve Tesla’s underlying problem

Photo by: Tesla

This is where things really start to go downhill for Tesla: its family of cars is getting older. The world’s best-selling car of 2023, the Model Y, is rapidly losing ground to new competitors in terms of specifications and performance. Other automakers are rapidly expanding into electric spaces that Tesla is ignoring, like three-row SUVs and affordable compact cars. Musk even recently said he didn’t see the point in making a “regular” $25,000 electric vehicle that wasn’t fully autonomous, because he wouldn’t be investing in the future; “That would be completely contradictory to what we think,” he said during a recent earnings conference call. And there are many signs that Request for cybertrucks slides too.

Tesla expected to release an updated “Juniper” Model Y next year, and there is no doubt that this will boost electric vehicle sales. But with Musk, more and more I’m tired of making carsand very few new models on the horizon, and an automotive industry and population that simply isn’t ready for full autonomy yet, where does Musk expect growth from? Maybe Tesla’s plan is to knock out its electric competitors, run around with modestly updated versions of its current cars, live without regulatory credits, then wait as long as it takes to become a robotic taxi company, while hoping that the fallout from Musk’s own antics isn’t. It doesn’t completely bring down its own sales.

If that’s really the case, we should all feel comfortable. We’ll be here for a while.

In the meantime, it’s hard to see who will really benefit from eliminating tax credits. apart from the oil industry and China. It certainly won’t be the largest electric car maker in the country.

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