GOP tax bill helps its biggest donor Musk, but harms his company, Tesla

Republicans announced a new tax plan today and it’s just about as bad for America as expected, taking money for healthcare, clean air and energy efficiency from American families and sending it to the ultra-wealthy instead.

You might think that this helps one of those ultra-wealthy, Elon Musk, who gave hundreds of millions of dollars to ani-EV candidates to help make this happen. But the main source of his wealth, Tesla, will be specifically harmed by rescission of EV credits – and its competitors largely won’t be.

Now that the republican party has unveiled its job-killing tax proposal, we know a little more about what’s in it.

Originally, it was thought by many that the proposal would completely kill all federal EV credits, with some estimating that the $7,500 credit would go away immediately (personally, I never thought it would be that stupid, but you never know with the republicans).

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But it’s clear they want to destroy the credit and make cars more expensive for Americans. After all, Donald Trump, while running for an office he remains Constitutionally barred from holding, asked oil companies for a billion-dollar bribe in exchange for ending the EV credit, a promise he has continued to say he will uphold as he squats in the aforementioned office.

And last week, House Speaker Mike Johnson said that the House is likely to end the credit.

It turns out the details are a little more nuanced than that, and that while the credit is ending, it will sunset a little later than many feared.

It’s likely that the credit will last through the end of this year – which makes sense, since that’s how tax changes often work. Then, at the end of the year, Inflation Reduction Act credits will largely disappear.

However, in the current draft of the bill, some automakers will retain access to some EV credits, for a time. This is due to an exception given for manufacturers who have not sold 200,000 vehicles between 2009 and 2025, a similar cap to the old EV tax credit that was first implemented in 2008, before Congress improved it and removed the cap in the Inflation Reduction Act.

So, smaller manufacturers will continue to have some support, while large manufacturers who have already sold plenty of cars will lose all of their credits.

A number of manufacturers have already reached the 200k EV cap, including Nissan, Ford, Toyota, Hyundai/Kia, GM, and of course, Tesla. Those manufacturers will lose access to credits.

But others who started late or have more niche offerings continue to be under the 200k cap. These include companies like Mercedes, Honda, Lucid, Mazda and Subaru.

Specifically, Rivian has been identified as one of the possible winners here, as the company has not yet sold 200,000 vehicles, though should be crossing that line sometime in the next couple years.

And finally, the real competition for Tesla, gas cars, will not lose anything from the rescission of EV credits. Those cars will continue selling, they’ll just have a $7,500 advantage relative to today – on top of their advantage of each gas car being allowed to choke the world with $20,000+ in unpaid pollution costs, which show up on everyone’s hospital bills and health insurance premiums.

So that brings up an interesting point: when Tesla and its bad CEO Elon Musk threw their support behind all of this, what did they think they would get out of it?

After all, Tesla wrongly said, at the behest of Musk and his tortured logic, that ending EV credits would somehow help it.

We called out that obvious incorrect statement at the time, saying that No, for crying out loud, killing EV subsidies will not help an EV company.

But now it turns out that the situation is even worse for Tesla, because not only does Tesla’s gas competition get to keep the credits, but many electric competitors will get to keep them for some time as well.

And don’t forget that this last quarter, government incentives were the only thing keeping Tesla from losing money. A regulatory environment that is more hostile to Tesla could turn black to red on the balance sheet, along with dropping sales and negative brand perception. Thank the bad CEO you voted to give $55B to for that loss, shareholders.

But the oil companies, another competitor for Tesla, will continue to benefit from roughly $760 billion in subsidy per year in the US alone, in terms of the health and environmental costs they impose on society and do not pay for.

If that subsidy was ended alongside the $7,500 EV credit, then EVs would indeed come out on top. But instead of ending those massive subsidies to fossil fuels, republicans have proposed to increase them, by cutting down enforcement and loosening pollution limits, both through this tax bill and through other agency actions and proposals.

Further, the tax proposal unveiled today sunsets credits for many other products that Tesla sells. There are solar and home energy efficiency credits which Tesla takes advantage of through its Energy division, which sells solar and home battery systems to homeowners. These can be worth tens of thousands of dollars per installation, and those will go away if this proposal goes through.

So in the end, Tesla loses access to credits both on its cars and its Energy division, while its competitors get an even more beneficial regulatory environment to continue polluting. And even its electric competitors get a temporary leg up for the time being.

Meanwhile, Elon Musk gets his part of the $4.5 trillion in tax cuts that go directly to wealthy elites. So at least his pocketbook will look slightly better for a time, even though the company that has been responsible for filling it it will fall further due to less attractive product pricing and through his own association, which has driven protests against the company, embarrassed owners and pushed many customers away.

So, to those of you who wanted us to “trust the plan” – how, exactly, is this beneficial to Tesla, again?

Among the proposed cuts is the rooftop solar credit. That means you could have only until the end of this year to install rooftop solar on your home, before republicans raise the cost of doing so by an average of ~$10,000. So if you want to go solar, get started now, because these things take time and the system needs to be active before you file for the credit.

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