The Trump administration’s transition team is reportedly planning to eliminate the $7,500 federal tax credit for electric vehicle (EV) purchases as part of broader tax reform efforts, a move that has sent shockwaves through the automotive and clean energy sectors. The decision could significantly hamper the growth of EV adoption in the U.S., which is already lagging compared to international competitors like China.
According to sources familiar with the matter, the proposal is being spearheaded by an energy-policy team led by billionaire oil tycoon Harold Hamm and North Dakota Governor Doug Burgum. The group has met several times since Trump’s election victory, including gatherings at Mar-a-Lago. They argue that removing the tax credit would save costs and help fund the extension of Trump’s expiring tax cuts.
Industry Divided Over Subsidy Repeal
Tesla, the nation’s leading EV manufacturer, has expressed muted support for ending the subsidy. Tesla CEO Elon Musk, a close Trump ally, noted in a July earnings call that eliminating the credit could hurt Tesla’s sales slightly but would have a “devastating” impact on competitors like General Motors (GM) and Ford. Musk suggested the move might ultimately benefit Tesla by hobbling its rivals.
“Tesla’s engineering and manufacturing efficiencies allow it to weather this change better than others,” said Nicholas Mersch, portfolio manager at Purpose Investments. “For competitors still scaling EV production, losing the subsidy is a major blow.”
While Tesla’s market share has declined from over 80% in 2020 to just under half of all U.S. EV sales, it remains dominant. Meanwhile, legacy automakers like GM and Ford are grappling with significant EV production costs and flagging demand. Ford recently paused production of its F-150 Lightning EV due to weak sales, despite reliance on the federal tax credit to attract price-sensitive buyers.
UAW, Industry Leaders Warn of Fallout
The potential repeal of the EV tax credit has drawn criticism from labor unions, policymakers, and industry advocates. United Auto Workers (UAW) President Shawn Fain slammed the proposal, warning it could jeopardize “hundreds of thousands” of auto industry jobs. Automakers have relied heavily on the credit to stimulate demand and offset steep production costs, with GM alone receiving $800 million in related subsidies this year.
Energy Secretary Jennifer Granholm, speaking at the COP29 climate conference, called the plan “counterproductive,” stating that removing the credit would make the U.S. less competitive globally. “You eliminate these credits, and what do you do? You cede the territory to other countries, particularly China,” she said.
A Tesla-First Policy?
Critics argue the move could create an uneven playing field, favoring Tesla while hindering efforts by other automakers to scale EV production. Mike Murphy, a Republican strategist and leader of the EV Politics Project, described the proposal as “a Tesla-first, everybody-else-second policy,” accusing the Trump team of neglecting broader American auto industry interests.
Meanwhile, Trump’s campaign promises to bolster oil and gas production and roll back clean energy initiatives have won him support from fossil fuel interests. Hamm, a vocal advocate for repealing the credit, views it as an unnecessary government subsidy.
Global Implications
Repealing the subsidy could have international ramifications, potentially ceding leadership in EV manufacturing to China. Chinese automakers, backed by robust government subsidies, have surged ahead, with electric and hybrid vehicles accounting for over half of recent car sales in the country.
While Tesla benefits from U.S. tariffs on Chinese EVs, Musk acknowledged the difficulty of competing with Chinese rivals in their home market, where EVs sell for as little as $10,000.
As the Trump administration prepares to finalize its policy agenda, the fate of the EV tax credit remains uncertain. Its removal could reshape the U.S. automotive landscape, posing challenges for the broader EV transition while potentially consolidating Tesla’s market dominance.
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