The removal of the $7,500 federal tax credit on electric vehicle purchases could significantly impact Tesla, according to Gary Black, Managing Partner of The Future Fund. This change would effectively raise the price of Tesla vehicles in the US compared to their peers, posing a huge negative catalyst for the company.
Impact on Tesla and Its Competitors
While about nine Tesla vehicle models currently qualify for the tax credit, only 12 vehicles from rival brands qualify. Black, a Tesla bull, disagrees with the notion that the removal of the tax credit would harm competitors more than Tesla. He argues that:
- Tesla’s US sales account for 30-35% of its global volume
- General Motors, Ford, and Stellantis’ US EV sales account for only 4-5% of their respective global volumes
Black believes that the removal of the tax credit will not drive rivals out of the EV segment. He notes that when Tesla cut EV prices in 2022-2023, its competitors matched the price cuts, and Tesla’s stock was hurt the most in the ensuing price war.
Trump’s Proposal
In November, it was reported that Donald Trump’s transition team planned to kill the $7,500 tax credit available on EV purchases. After his inauguration, Trump stated that his administration would consider ending EV tax credits. Currently, multiple Tesla vehicles qualify for the $7,500 federal tax credit, including:
- Single-motor and dual-motor Cybertruck
- All three variants of the Model 3 and Model Y
- All-wheel drive variant of the Model X
Rival models that qualify for the credit include the Honda Prologue, Cadillac Optiq, and the LT Model of the Chevrolet Silverado EV.
Reaction from Elon Musk
Tesla CEO Elon Musk has previously downplayed the impact of a drop in EV tax credit for Tesla, stating that the elimination of subsidies would only have a slight impact on Tesla but would be devastating for its competitors. However, not all Tesla bulls share the same opinion, with some, like Black, expressing skepticism.
Conclusion
The proposed revocation of the $7,500 electric vehicle tax credit could have significant implications for Tesla and the EV industry as a whole. As the situation continues to unfold, it will be important to monitor the impact on Tesla and its competitors.