Elon Musk Backs Calls For End To EV Subsidies, But Former Tesla Exec Warns Of 'Massive Drop' In Manufacturing Investments If Trump Follows Through

Tesla Inc (NASDAQ:TSLA) CEO Elon Musk on Thursday called for an end to all subsidies following a media report that President-elect Donald Trump is planning to end the $7,500 consumer tax credit for purchasing EVs under the Inflation Reduction Act (IRA).

Musk’s Take: “In my view, we should end all government subsidies, including those for EVs, oil and gas,” Musk wrote on X following a report from Reuters that Trump’s transition team is planning to kill the $7500 tax credit for EV purchases. Tesla also expressed support for the decision to a Trump transition committee, the report added

This is not the first time that Musk and Tesla have spoken for the elimination of subsidies. During Tesla's second-quarter earnings in late July, Musk alleged that the impact of the elimination of subsidies would only be slight for Tesla but devastating for its competitors. The elimination of EV subsidies would probably help Tesla in the long term, he added.

Former Employee’s Take: Not all share Musk’s optimism. Former Tesla senior executive Rohan Patel said on Friday that Tesla made a huge effort to utilize the $7500 tax credit through its various communication avenues.

“The $7500 was a particularly effective way to increase demand,” Patel said. “Hopefully Republicans keep and enhance other parts of the IRA, or they'll see a massive drop in manufacturing investments over the coming years…”

Patel was Tesla’s vice president of global public policy and business development until April earlier this year.

Analysts Are Divided: Wedbush analyst Dan Ives, however, believes the elimination of the tax credit could boost Tesla in the long run.

"While this is a clear negative for the EV industry at first look and would particularly hurt GM, Ford, Stellantis, and Rivian… on the flip side we view this as a net bullish move for Tesla and Musk over time," Ives said in a note on Thursday, noting Tesla’s “unmatched scale” as compared to others.

According to The Future Fund Managing Partner Gary Black, however, the killing of the consumer tax credit will have a negative impact on Tesla’s EPS similar to the one experienced by the company when it resorted to price cuts to increase delivery volume in 2023. The decision will likely not impact legacy automakers given EVs are only a small segment of their business, he added.

Tesla researcher Troy Teslike is seemingly with Black too. “Tesla competes with gas cars from BMW, Mercedes, Porsche, and Audi. Therefore, without the tax credit, Teslas will effectively be $7,500 more expensive compared to those cars,” Teslike said, focussing on the impact of the decision of consumers.

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