Having barely arrived at the White House, the new President of the United States, Donald Trump, does not intend to give any favors to the electric car, and Elon Musk, the boss of Tesla, seems on the same wavelength.
A politician who keeps his electoral promises is generally seen as good news. But this is perhaps not the case for the electric car. According to information relayed by the Reuters agency, Donald Trump, freshly elected for the second time President of the United States, is already preparing the cancellation of federal subsidies of $7,500 for the purchase of electric cars. This is an electoral promise of the former American president, which should be kept upon his return to power.
Reuters, citing two sources familiar with the matter, says the removal of subsidies will be part of broader tax reform that the Trump administration wants to introduce. What is particularly surprising about this project, this is the support of Elon Muskthe CEO of Tesla, who not only financed part of Donald Trump’s election campaign, but who was also appointed to lead the Department of Government Effectiveness.
Opposition from the automobile industry
This decision to remove subsidies could be linked to Donald Trump’s long-standing relationship with big oil companies, often referred to as “Big Oil.” For the measure to be applied, it will have to be validated by Congress, where the Republicans recently obtained a majority. However, the move faces fierce opposition from the Alliance for Automotive Innovation, a group representing the auto industry. This organization strongly opposes the cancellation of the Inflation Reduction Act (IRA), the law which introduced these tax credits for the purchase of electric vehicles.
In a statement, the Alliance for Automotive Innovation highlighted that “Maintaining these provisions, including the Advanced Production Tax Credit, Consumer Tax Credit, and Commercial Leasing Credit, is essential to solidifying the United States’ role as a global leader in the future of automotive technology and production.”
Why does Elon Musk also want an end to subsidies for electric cars?
One might wonder why Elon Musk supports this measure which might seem, at first glance, harmful to the electric vehicle sector. The answer lies in Tesla’s position: the company is a leader in the electric car market and has a mature and profitable business model.
Its main competitors like Ford and General Motors are behind in the development and marketing of electric vehicles. Eliminating subsidies could thus give Tesla a competitive advantage by complicating the task of other manufacturerswho are still counting on this financial support to accelerate their transition to electricity.
Despite sales falling short of forecasts, the electric car market continues to grow, accounting for 9% of the U.S. market in the third quarter of this year. However, a removal of subsidies could cause considerable damage to the entire sector, potentially forcing automakers to review their electrification strategy. This is what we have observed in Europe this year with the sudden end of subsidies in Germany.
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