The electric vehicle (EV) industry witnessed a major blow yesterday after Reuters reported that President-elect Donald Trump plans to remove the $7,500 consumer tax credit for EV purchases. It is worth highlighting that Trump’s energy policy transition team has met several times post-election to discuss this matter. Following the news, shares of Tesla (TSLA), Rivian (RIVN), and Lucid (LCID) dropped 5.8%, 14.3%, and 4.6%, respectively.
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The tax credit, a key part of President Biden’s Inflation Reduction Act (IRA), played a significant role in boosting EV adoption. Its removal would increase the cost of EVs, making them less affordable for consumers and impacting the industry’s growth. It is worth noting that the EV market is already struggling with low demand due to high vehicle prices and limited charging infrastructure.
Importantly, traditional automakers like Ford (F), General Motors (GM), and Stellantis (STLA), which have invested heavily in EV development, would also be affected by the loss of the tax credit. This could make it difficult for them to compete with established players like Tesla and shift their focus back toward gasoline-powered vehicles.
Elon Musk Supports the End of EV Tax Credits
Tesla’s CEO, Elon Musk, is surprisingly supporting the potential end of EV tax credits, despite being a major beneficiary of this incentive.
Musk believes that while a policy change might hurt performance in the short term, it would eventually benefit the company by reducing competition in the EV market. Further, Tesla’s robust scale, strong brand, and strong financial position keep it well-positioned to navigate the change and maintain its market leadership.
Which EV Stock Is Best to Buy?
We used TipRanks’ Stock Comparison tool to see which EV companies rank favorably based on different parameters. As we can see, RIVN and GM have Moderate Buy consensus ratings, while TSLA, LCID, and F stocks are currently rated as Hold. Importantly, analysts are predicting solid upside potential in RIVN and LCID stocks.
