Indications are that as soon as Donald Trump gets sworn into the office of the President, there will be sweeping tax reforms. Insiders say that the $7,500 government incentive to purchase electric vehicles will be one of the first cuts. As if electric vehicles sales in America didn’t have enough problems, this will certainly not help, and must be sending a shiver up the spines of the car company CEOs who went really heavy into electric vehicle production, spending billions of dollars. We’ve seen some pretty massive cutbacks and layoffs this month from big automakers, and I suspect they are anticipating a shift away from all-electric vehicles, and proactively trying to get ahead of what seems like inevitable losses heading toward them.
A group representing large electric vehicle and battery manufacturers just last week urged Mr. Trump not to kill the tax credits for electric vehicle sales and production, citing the impact on key states that voted for the Republican. However, let’s be honest here, the President-elect is a one term president this time, and overhauling the U.S. economy and reducing the deficit was his #1 promise.
The Zero Emission Transportation Association, represented by Rivian, Tesla, Uber, Lucid and Panasonic, said in a statement that “production tax credits have driven enormous job growth in states like Ohio, Kentucky, Michigan, and Georgia” and went on to stress that elimination of the $7,500 credits would undercut investments in those states, and hurt American employment. However, Mr. Trump also promised on the campaign trail to boost oil production inside the borders of the United States, and therefore, it makes sense that electric vehicles would be counter-productive to that effort.
Elon Musk on board with eliminating $7,500 EV Subsidy
The strong relationship Mr. Trump has with Elon Musk, the CEO of electric car maker Tesla, and the richest man in the world currently, is no secret. Musk contributed a ton of money to the Trump campaign and was an outspoken ally and pro-Trump influencer in the last month or so of the presidential campaign. Elon Musk has acknowledged that the elimination of the $7,500 electric vehicle incentive would hurt Tesla sales which are struggling already. It hit me as odd that Musk would be in favor of eliminating the subsidy, given his position with Tesla.
Then it hit me, and I speculated about this on the Car Pro radio show last Saturday. Love him or hate him, Elon Musk is a very smart man. Tesla rose to prominence in the EV world primarily due to the huge head start the company had. Tesla went well over a decade without any serious competition for people wanting an electric vehicle, but that has changed in the last few years, with virtually every automaker in the world sinking billions of dollars into trying to copy Tesla’s success. Many went so far as stating that entire vehicle lineups would be 100% electric, some as soon as 2030.
So, what is Elon thinking? My guess: Eliminating the $7,500 EV gift will hurt Tesla some, but it will eliminate much of the competition and return Tesla to being the go-to EV maker. Smart move on his part, and frankly, it may be one of the reasons he worked tirelessly to help Mr. Trump get elected as the 47th President of the United States. All smart businesspeople have an angle, and I suspect this was his.
Now is the time to go electric if you are leaning that way
Many electric vehicles are expensive and primarily purchased by upper-income Americans. Therefore, the $7,500 fed handout might not be a make-or-break thing, but if you are going that direction anyway, you may as well get the money while it’s there. For others who are looking at some of the lower-priced electrics, the subsidy is a big deal and a good reason to pull the trigger by January 20, 2025, or better yet, before December 31 of this year while the big car sales are going on. People who lease electric vehicles should especially take advantage of this perk, and I always recommend first-time EV owners lease if at all possible.
I also talked about this on last weekend's Car Pro Show, and you can listen in to the clip below:
In closing
As with any new administration coming into power, there will be changes. Some people will love them, others will not, but America spoke. Change is coming to the automotive landscape, but it may go deeper that just this subsidy. This leaves many unanswered questions about the future and what may be sitting in your driveway in the coming years.
Will the Trump administration bring a screeching halt to the 7.5 billion dollars allocated for electric car charging stations across America? Some of that money is already spent, but the balance could be stopped. Given how leery Americans are about range anxiety, that action could make many think hard about taking the electric vehicle plunge. If we become completely independent on oil, gas prices will likely drop and boost sales of larger, gasoline-powered vehicles. We do love our SUVs in the U.S.A.
Whatever happens, the only sure bet is the focus is going to change, and as always, I’ll be here to walk you through it and help you make sense of what is going on.