One of the first executive orders of President Trump will be to propose reduction or elimination of the $7,500 EV tax credit - for which currently 21 U.S. made cars and trucks are eligible, including 9 Tesla trims. During and since the campaign, Mr. Trump and Republican leaders frequently criticized the EV tax credits and vowed to eliminate them. But Congress still has to approve any repeal. One area ripe for repeal is the so-called “EV leasing loophole” that permits EV companies to earn the $7,500 EV credit without regard to income limits ($150K if single, $300K married), price caps ($55K on sedans, $80K on SUVs, pickups, vans) , and battery sourcing requirements.
The incentive was part of the Inflation Reduction Act (IRA) signed into law by President Biden in 2022. EVs have to be assembled in North America, and 60% of the value of critical minerals used in the batteries must be extracted or processed in the US or one of its trade allies.
The Republicans have a very small majority in the House, which could make it hard for the party to pass legislation of any kind.
Another wild card is Elon Musk, with
$TSLA accounting for nearly half of all EVs sold in the country. With Elon Musk close to the president, it is important to know how he will seek to shape changes to the tax credit. Other auto executives have also been lobbying Mr. Trump against a repeal of the credit. Among them is Ford’s executive chairman, William C. Ford Jr., who recently spoke to the president-elect.
It’s difficult to know how much of the likely repeal is discounted in $TSLA’s current stock price, but much will depend on the details and timing of any such repeal, There may be a grace period before EV credits expire, which would pull EV volumes forward.