Trump terminates electric vehicle subsidies, which is actually a "great benefit" for Tesla!

Trump's plan to terminate electric vehicle subsidies may be a good thing for Tesla, as it will bring greater losses to its competitors.

On Thursday local time, media reports indicated that U.S. President-elect Donald Trump's transition team plans to cancel the $7,500 tax credit available to consumers when purchasing electric vehicles. This subsidy is one of the core measures of President Biden's Inflation Reduction Act (IRA).

As a result of this news, electric vehicle stocks collectively plummeted, with Nikola down 22.76%, ZEEKR ADR down 23.68%, "Tesla's rival" Rivian down 14.3%, and Tesla down 5.77%.

Wedbush analyst Dan Ives stated, "Trump's election is overall negative news for the electric vehicle industry; however, we believe this is a huge positive for Tesla."

The reason for the positive outlook is that Tesla has never been the biggest beneficiary of this subsidy. Compared to Tesla, which sells cars directly, this subsidy is more favorable for other automakers that benefit from tax incentives through "leasing loopholes."

In the U.S., most cars purchased directly by consumers do not qualify for the full subsidy because many of their parts or materials come from overseas, but leased vehicles do not have these requirements, allowing consumers to enjoy the subsidy through leasing.

This has also led to a surge in electric vehicle leasing in the U.S. Data shows that nearly 60% of electric vehicles sold in the U.S. are leased rather than purchased directly. Tesla is an exception, as its business model leans more towards profit through direct sales rather than leasing. Tesla believes that over-reliance on leasing can lead to a decline in vehicle residual values.

In contrast, many other automakers have already factored tax incentives into their pricing; the larger the subsidy, the more attractive the product is to consumers. Without these subsidies, automakers may have to lower prices to reduce losses or risk losing some customers.

Moreover, despite the fierce price war, Tesla's electric vehicles can still be profitable, while other U.S. automakers have consistently lost money in their electric vehicle businesses, with many relying heavily on electric vehicle subsidies to reduce losses.

It's no wonder that Musk supports Trump's plan to cancel electric vehicle subsidies. Tesla representatives told Trump's transition committee that they support the cancellation of this subsidy. Earlier this year, Musk stated that the cancellation of the subsidy might have a slight impact on Tesla's sales but would deal a greater blow to competitors, including traditional automakers like General Motors.

Since Trump's election, Tesla's market value has increased by $300 billion, surpassing the total market value of Ford, General Motors, and Stellantis.