Why Does Elon Musk Support Ending EV Tax Credits? Here Are Two Reasons

Elon Musk wears many hats. He is the CEO of America’s leading electric vehicle maker and an influential adviser to President-elect Donald Trump, who could end federal support for electric vehicles.

Trump’s transition team is reportedly preparing a plan Eliminate $7,500 electric vehicle tax creditIt’s a key part of President Biden’s efforts to accelerate EV adoption in the US and a major tailwind for Tesla (TSLA). Musk reportedly told Trump that he supports these plans.

Trump’s plans for electric vehicles and related tax credits have not yet been made public. Still, Musk’s support for Trump’s electric vehicle plans has raised questions about why Trump would support headwinds for his own company. Here are some possible explanations.

Tesla’s Scale Gives It an Advantage Over Competitors

Trump’s second term It is expected to be difficult for the EV industry in general. In addition to eliminating EV tax credits, Trump has also promised to repeal vehicle emissions standards that would force automakers to make EVs a larger share of their total sales over the next decade.

But some see the potential for Tesla to benefit from Trump’s anti-EV policies. In a call with investors in July, Musk said eliminating federal tax credits could benefit Tesla in the long run because it would be “disruptive to our competitors.”

Tesla is one of the only U.S. automakers whose electric vehicles are profitable, giving it a buffer against industry-wide headwinds. The company is able to produce electric cars at a lower cost than its domestic rivals, allowing them to lower their prices in a market without subsidies.

Still, Tesla’s sales are likely to be hurt by the elimination of the EV tax credit. Gene Munster, co-founder of Deepwater Asset Management, likened the end of the EV tax credit to a 15% price increase on Tesla cars that would reduce sales.

Ending the tax credit could also discourage competitors like General Motors (GM) and Ford (F) has abandoned continuing to invest heavily in EVs, leaving the door open for Tesla to grow its already sizeable market share.

Musk is All-In on Autonomous Cars

Musk’s support for ending EV subsidies may also stem from his big bet on autonomous driving and robotaxis. “Tesla’s value is largely autonomy,” he said in July about questions about EV tax credits. “These other things are a problem with autonomy.”

The Trump team plans to make a federal framework for autonomous vehicles a priority of the incoming Department of Transportation. Bloomberg It was reported Monday. A framework to accelerate the adoption of driverless vehicles would benefit Tesla. Prototypes announced Two new autonomous vehicles were introduced last month.

Musk expects Tesla’s Cybercab and Robovan, neither of which feature pedals or steering wheels, will eventually create a robotaxi fleet that could compete directly with ride-sharing services like Uber (UBER) and Lyft (LYFT).

Since articulating this vision, Tesla’s shares have soared as some investors have redefined Tesla as an autonomous vehicle and artificial intelligence company rather than a traditional automaker. Before Trump’s re-election, the path to making Musk’s robotaxi dream possible was seen as facing further regulatory hurdles; Companies like Alphabet’s (GOOG; Google) Waymo and GM’s Cruise have faced serious scrutiny from safety officials.

But Musk’s influence on Trump could help pave the way for Tesla. “For Tesla, the golden road around Cybercab and autonomy is now within reach with a strengthened Trump/Musk strategic alliance unfolding in real time,” Wedbush analysts wrote.