Trump wants to make the EV tax credit a challenge, and Elon Musk agrees.
President-elect Trump's transition team I made a pledge Eliminating the credit for electric vehicle buyers, which means new cars are worth up to $7,500 and used cars are worth up to $4,000.
As a reminder, this is also the law that led to the banning of kill switches, speed limiters, and the sale of motorhomes.
It was intended to encourage a broader transition from internal combustion engines to electric drivetrains by lowering the net retail price of electric vehicles for U.S. consumers.
But what is often overlooked is that the deduction depends on how much federal tax you already pay. Only people with a tax liability of $7,500 or more are eligible for the full credit, while low-income households are not eligible at all.
It reminds me of President Obama's “cash for flops” program. This is an incentive aimed at average drivers that will primarily help the wealthy.
While the average American won't notice if the tax credit disappears, automakers certainly will – including Mr. Musk's company Tesla. Earlier this year, Musk acknowledged as much. Tesla stock fell more than 5% after the news first broke.
But Musk also knows that cutting credit could further hurt competitors. Close rival Rivian's stock has fallen more than 14% this week. Legacy car companies that have invested heavily in EVs are also expected to suffer huge losses.
Last month, the Alliance for Automotive Innovation, an industry group representing nearly every major automaker other than Tesla, urged Congress to preserve the EV tax credit, saying the EV tax credit would “lead the United States to the world in the future of auto technology and manufacturing.” This is extremely important in order to solidify his position as a leader in the field.
The credit, introduced as part of President Biden's Inflation Control Act of 2022, is limited to vehicles that meet various technical requirements, such as assembly location and material procurement. It is also limited to vehicles valued at less than $80,000 and can only be claimed by households with annual incomes of less than $300,000.
Remember, this is also the law that led to the banning of kill switches, speed limiters and the sale of motorhomes.
According to Reuters, members of the Trump transition team discussing eliminating tax credits include billionaire oilman Harold Hamm and North Dakota Governor Doug, who has close ties to the oil and gas industry.・Includes Mr. Burgum.
The president-elect will seek to increase production even as U.S. oil production is at an all-time high, and President Biden's spending will include subsidies for wind and solar power and mass production of hydrogen, in addition to EV financing. The United States promised to withdraw such clean energy initiatives. .
Some of the clean energy programs included in the Inflation Control Act will be difficult to reverse because they have already begun distributing money to popular Republican-dominated states.
Still, the savings from EV credit cuts alone could pay for the multitrillion-dollar extension of tax cuts made during the first Trump administration. These cuts are set to expire next year.
Repealing the EV credit would be an easy win for Trump in a Republican-controlled Congress, but it would be a huge blow to Biden's EV mandate. U.S. automakers and consumers alike should hope this is just the beginning.
