Tax reform legislation that targets killing a $7,500 EV tax credit for plug-in vehicles would do more damage to Detroit’s Big Three automakers than to Tesla and its CEO, Trump whisperer Elon Musk.
Repealing the subsidy, part of President Biden’s signature Inflation Reduction Act, is being discussed in meetings by an energy-policy transition team led by billionaire oilman Harold Hamm, founder of Continental Resources, and Republican North Dakota Governor Doug Burgum.
U.S. Energy Secretary Jennifer Granholm said on Friday that cancelling the credits would make the U.S. less competitive.
Representatives of Tesla have told a Trump-transition committee they support ending the subsidy. Musk said in July that killing the subsidy might slightly hurt Tesla sales but would be “devastating” to its U.S. EV competitors, which include legacy automakers such as General Motors.
- Tesla holds nearly half of the U.S. market for EV sales. While Tesla also benefits from the subsidies, having three different models that qualify, those credits are more valuable to other automakers whose vehicles are not yet profitable by helping to make them more affordable.
- Tesla’s lower-cost models source batteries from China, which means they don’t qualify for the $7,500 incentive unless the vehicle is leased.
- Chevrolet has five vehicles that qualify for the $7,500, Cadillac has one, Chrysler has one and Ford has one. Two Jeeps, one Ford and one Lincoln meet the requirements for a $3,750 tax credit.
The Detroit News reports that Musk’s involvement in the administration could jeopardize automotive safety enforcement, the stability of EV sales for the Detroit Three automakers and challenge efforts to protect U.S. autoworker jobs in negotiations over tariffs and trade with Mexico.
If tax credits for EVs are eliminated, the cost will be on the automakers, further delaying EV profitability.
Paul Zimmermann, vice president and dealership partner of Matick Automotive Group with GM and Toyota stores in Metro Detroit, said the group leases around 95% of the EVs it sells since the federal tax credits make the lease offers very appealing to customers with savings of $200 to $300 a month.
“So, would it hurt EV sales? Yeah, all of a sudden, a $350 payment is now $662 or $558,” he said of losing the incentive.
Also, cutting the EV consumer tax credit wouldn’t address the pressure on automakers with respect to complying with federal fuel economy and greenhouse gas tailpipe emissions regulations that were adopted under Biden.
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