Why Does Elon Musk Assist Ending EV Tax Credit? Right here Are Two Causes

Elon Musk wears many hats. He is the CEO of America’s main electrical automobile maker—and an influential advisor to Donald Trump, a president-elect who could finish federal help for electrical autos.

Trump’s transition crew reportedly is getting ready plans to remove the $7,500 electrical automobile tax credit score, a key piece of President Biden’s efforts to speed up U.S. EV adoption and a serious tailwind for Tesla (TSLA). Musk has reportedly instructed Trump he helps these plans.

Trump’s plans for EVs and the related tax credit have but to be publicly detailed. Nonetheless, Musk’s help for Trump’s EV plans has raised questions on why he would endorse seeming headwinds for his personal firm. Listed here are some attainable explanations.

Tesla’s Scale an Benefit Over Opponents

Trump’s second time period is anticipated to be troublesome for the EV {industry} general. Along with scrapping EV tax credit, Trump has vowed to rescind automobile emissions requirements that might drive automotive producers to make EVs a larger portion of their complete gross sales all through the subsequent decade. 

But some see the potential for Tesla to learn from Trump’s anti-EV insurance policies. Musk himself stated on a name with buyers in July that eliminating the federal tax credit may gain advantage Tesla within the long-term partly as a result of “it could be devastating for our rivals.”

Tesla is among the solely U.S. carmakers whose electrical autos are worthwhile, giving it a buffer in opposition to industry-wide headwinds. The corporate can construct electrical automobiles at a decrease value than home rivals, enabling it to undercut them on pricing in a market with out subsidies.

Nonetheless, Tesla’s gross sales are more likely to be harm by the elimination of the EV tax credit score. Gene Munster, co-founder of Deepwater Asset Administration, has in contrast the top of the EV tax credit score to a 15% worth hike on Tesla automobiles that might reduce into gross sales.

Ending the tax credit score might additionally discourage rivals like Common Motors (GM) and Ford (F) from persevering with to take a position closely in EVs, leaving the door open for Tesla to develop its already sizable market share. 

Musk All-In on Autonomous Automobiles

Musk’s help for ending EV subsidies might additionally stem from his large wager on autonomous driving and robotaxis. “The worth of Tesla overwhelmingly is autonomy,” he stated of questions on EV tax credit in July. “These different issues are an annoyance relative to autonomy,”

The Trump crew plans to make a federal framework for autonomous autos a precedence of the incoming Transportation Division, Bloomberg reported Monday. A framework that accelerates the adoption of self-driving automobiles would profit Tesla, which unveiled prototypes of two new autonomous autos final month. 

Musk expects Tesla’s Cybercab and Robovan, neither of which has pedals or a steering wheel, to ultimately kind a robotaxi fleet that competes instantly with ride-sharing providers like Uber (UBER) and Lyft (LYFT). 

Since articulating that imaginative and prescient, Tesla’s inventory has soared as some buyers have reframed Tesla as an autonomous automobile and AI firm somewhat than a traditional automotive maker. Earlier than Trump’s re-election, the trail to creating Musk’s robotaxi dream attainable was seen as going through extra regulatory roadblocks; Corporations like Alphabet’s (GOOG; GOOGL) Waymo and GM’s Cruise have confronted important scrutiny from security officers.

Musk’s affect with Trump, nevertheless, might assist clear the trail for Tesla. “The golden path for Tesla round Cybercabs and autonomous is now inside attain with an emboldened Trump/Musk strategic alliance taking part in out in actual time,” wrote Wedbush analysts.