The Trump Administration’s “Big Beautiful Bill” could bring an end to electric vehicles (EVs) subsidies. One of the biggest changes would be the tax credit that drivers got when buying an EV, which was usually about $7,500.
The original end date of these subsidies was seven years, in 2032, but the bill aims to end it by the end of this year. This will have repercussions for many EV manufacturers, most notably Tesla.
EV Subsidies
EV subsidies may go unnoticed by the average consumer, but they were important incentives for eco-conscious buyers and made the whole EV market affordable for the masses. More people were willing to buy EVs with the incentive, lowering the upfront cost of owning one.
EVs were competitively viable, but if the tax incentive disappears, gas vehicles could become more popular, leaving their environmentally friendly counterparts in the dust.
Tesla’s Struggles
This won’t be the first sign of trouble for EVs and Tesla. The company delivered declines by nearly a third last quarter compared to a year ago and has fallen 13% year-over-year.
The consumer market for Tesla cars has lowered significantly, and it seems that Tesla’s growth is being stunted. This issue could only be exacerbated by a cut to the incentives.
A Financial Loss
JPMorgan Chase has stated that if the EV tax credit dries up, then Tesla may lose over one billion dollars per year. That’s a substantial number and would hit the company hard.
The company’s recent success has been with the help of federal aid through these tax incentives, and while Elon Musk, Tesla’s founder, has publically flip-flopped on them, the company itself desperately needs them as sales decline.
More Than Just EVs
The bill encompasses many different eco-friendly businesses, cutting tax credits from solar and energy storage systems, which are an integral part of Tesla’s business. One of Tesla’s few departments that is still growing is its energy division.
With the days of these incentives seemingly numbered, this could be a huge loss for the sustainable energy market and ambitions of affordable clean energy in the U.S.
Introducing Additional Fees
If cutting incentives wasn’t enough, the bill would also add additional annual fees. These costs include $250 for EVs and $100 for hybrids.
The rationale behind these fees is to make up for the lost gas tax revenue, and will only serve to further distant consumers from the prospect of owning a “cleaner” car. EV ownership could become much more expensive under the new bill, which would drive customers back to gas powered vehicles.
Competitors
The loss of tax credit may not hit every EV manufacturer equally, and while Tesla will miss out, competitors that have yet to hit the 200,000 vehicle threshold like Rivian and Lucid could still get these credits.
This means that the company that formerly got the most out of these tax incentives will now find itself at a disadvantage compared to other automakers in the market.
Oil And Gas
Historically, Trump has been an advocate of oil and gas and critisized EV mandates and clean energy efforts. With EV subsidies being removed, that aids fossil fuels and voters who don’t like EVs.
These stipulations in the bill have also distanced Musk from Trump’s own interests, reignited their feud.
Broader Consequences
Ending EV subsidies will have a number of broader consequences on the industry as a whole. Thousands of people are employed by EV manufacturers and clean energy companies, and this change could risk their livelihoods.
The bill could also stagnate efforts for cleaner energy in America and their progress toward emissions targets. Both EV and solar stocks have seen a dramatic decline in stocks as investors become concerned.
How Will Tesla Cope?
While the changes in the bill will serve to further undermine Tesla’s efforts to remain a dominant EV manufacturer, the company will be able to cope in the short term.
However, as consumers face the decision to buy either EVs or gas-powered cars without any incentives, Tesla could only see a further decline in sales. The next one to two years will be an impactful period for Tesla as it tries to adapt to the new EV landscape.
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