How Elon Musk's Tesla could benefit from Trump's ‘big beautiful bill' that axes EV subsidies

Time of India

24-05-2025

You have until December 31 to buy an electric vehicle and claim the $7,500 tax credit if Trump's 'One Big, Beautiful Bill' makes it through the Senate (likely) and on to the president's resolute desk for his signature (for sure). Currently, the EV tax credits, which were implemented after former President Biden signed the Inflation Reduction Act in 2022, are set to expire December 31, 2032.
On January 20, Trump signed an executive order titled 'Unleashing American Energy,' which seeks to eliminate tax credits for electric vehicles (EVs) and halt federal funding for the national EV charging network. While the order effectively ended funding for the charging infrastructure in February, the EV tax credits are still in place.
Why no tax credit could be a good news for Tesla?
The $7,500 federal tax credit for electric vehicles is likely to be eliminated by the end of the year, according to a draft proposal released yesterday by the House Ways and Means Committee. The proposal is expected to be included in President Donald Trump's forthcoming comprehensive legislation, often referred to as his 'one big, beautiful bill.'
The bill will not only eliminate the $7,500 credit on new EV purchases, but also the $4,000 credit given on the purchase of used electric vehicles, and a $1,000 credit on the installation of Level 2 chargers. It will also impact solar subsidies that help generate clean energy in a residential setting. EVs would also be subject to a $250 road use fee.
While the loss of this credit could be a significant setback for many electric vehicle manufacturers—who depend on it to help offset the higher cost of EVs—it may not impact Tesla as severely. During a July earnings call, CEO Elon Musk was asked how the potential rollback of Biden-era tax incentives might affect the company. His response was characteristically opaque:
'I guess there would be like some impact. But I think it would be devastating for our competitors and would hurt Tesla slightly. But long term, probably actually helps Tesla, would be my guess.'
Though Musk didn't elaborate, there may be merit to his assessment.
For Tesla, there could be some positives from the bill and it all comes down to timing. In the long run, the current situation wouldn't bode well for Tesla—particularly if it weren't for two key developments: a slight delay in delivery timelines and the upcoming launch of more affordable vehicle models.
Tax credit sun-setting advantage
As the $7,500 EV tax credit will begin to phase out, it presents a unique opportunity for Tesla. Potential buyers who've been hesitant now face a decision: purchase an EV this year while the credit is still available, or wait and gamble on future price cuts. It's likely that many of these on-the-fence consumers will choose to act now, boosting Tesla's sales simply due to this sense of urgency. Other automakers are expected to benefit from the same dynamic.
This surge in demand could help compensate for Tesla's sluggish start to the year, largely due to production line upgrades for the Model Y at its global facilities.
Affordable models on the horizon
Earlier this year, Tesla announced plans to introduce more affordable vehicles in the first half of 2025. These models are expected to be priced around $30,000, though the company hasn't confirmed exact pricing. Ideally, these new EVs will be accessible even without tax incentives—targeting a broader customer base across the US
The arrival of truly affordable models could help mitigate the impact of expiring tax credits, positioning Tesla to maintain competitiveness and appeal to cost-conscious buyers.