Trump transition team aims to eliminate Biden EV tax credit

President-elect Donald Trump’s transition team is considering eliminating the $7,500 consumer tax credit for electric vehicle purchases as part of broader tax reform legislation, two told Reuters sources with direct knowledge of the matter.

The end of the tax credit could have serious consequences on an American transition already at a standstill. And yet, representatives for Tesla — by far the nation’s largest seller of electric vehicles — told a Trump transition committee that they supported ending the subsidy, said the two sources, who spoke undercover of anonymity.

Elon Musk, one of Trump’s biggest supporters and the world’s richest person, said earlier this year that removing the subsidy might slightly hurt Tesla’s sales but would devastate its U.S. car rivals. electric vehicles, which include historic automakers such as General Motors.

Tesla shares fell 5.5% to $311.77 Thursday afternoon.

Repealing the subsidy, which was a signature measure of President Joe Biden’s Inflation Reduction Act (IRA), is being discussed in meetings by an energy policy transition team led by the oilman billionaire Harold Hamm, founder of Continental Resources, and North Dakota Governor Doug. Burgum, both sources said.

The group has held several meetings since Trump’s Nov. 5 election victory, including at his Mar-a-Lago club in Florida, where Tesla Chief Executive Elon Musk has also spent a lot of time since the election. Representatives for Tesla, GM, Ford, Stellantis and the Trump transition did not immediately respond to requests for comment.

The Alliance for Automotive Innovation, a trade group representing nearly every major automaker except Tesla, also did not immediately respond. Last month, in an Oct. 15 letter, the alliance urged Congress to retain electric vehicle tax credits, calling them “critical to solidifying the United States as a global leader in the future of automotive technology and manufacturing.

Trump repeatedly pledged to end Biden’s “EV mandate” on the campaign trail, without spelling out specific targeted policies. The energy-focused transition team has determined that some of the clean energy policies in Biden’s IRA will be difficult to undo given that the programs have already begun allocating money, including to Republican-majority states where the programs are popular, the sources said. .

Trump’s energy transition team sees consumer credit for electric vehicles as an easy target, believing its elimination would gain broad consensus in a Republican-controlled Congress as part of a tax reform plan wider. Trump needs the savings from eliminating the credit to help finance the extension of his trillions of dollars in tax cuts that are set to expire at the start of his term, the two sources said. Congressional Republicans are expected to take this broader tax measure as one of their first actions.

Members of the energy transition team expect the Republican Congress to roll out legislation known as reconciliation to avoid relying on Democratic votes. Biden used the same tactic to pass the IRA bill. Eliminating electric vehicle tax credits is strongly supported by Hamm, a longtime Trump supporter, as well as most of the oil and gas industry as a whole.

The president-elect promised before the election to increase U.S. oil production even though it has reached record levels and to reverse President Biden’s costly clean energy initiatives, which along with the credit for electric vehicles, include subsidies for wind and solar power and the mass production of hydrogen.

WHY TESLA COULD BENEFIT

Tesla has over the years been the biggest beneficiary of electric vehicle tax credits like that of Biden’s IRA legislation, as well as similar credits that preceded it. And yet it could now benefit from removing subsidies, as that could hurt emerging EV rivals more than Tesla.

Musk himself pointed this out during an earnings conference call in July, when asked about the possibility of losing the subsidy, as well as tax credits for battery production, under a Trump administration.

Tesla had a market share of just under half of all electric vehicles sold in the third quarter of this year, according to data from Cox Automotive. Other automakers with notable electric vehicle sales in the United States, such as GM, Ford and Hyundai, are individually far behind. But Tesla’s U.S. electric vehicle competitors have collectively steadily eroded its market share in recent years, which exceeded 80% in the first quarter of 2020.

Additional reporting by David Shepardson.