Trump transition team decides to kill EV tax credit, and Elon Musk is delighted

President-elect Donald Trump is planning to kill the $US7,500 consumer tax credit for electric-vehicle purchases in the US, as his transition team plots a broad package of tax-reform legislation, and it appears his new best buddy, Tesla CEO Elon Musk, is delighted.

Reuters reported the decision on Thursday, US time, citing “two sources with direct knowledge of the matter”, and it confirms comments made by Trump during the campaign.

But even though analysts and activists say it could slow down the already stalling uptake of EVs in the world’s biggest economy, Reuters also reports that Tesla – the dominant player in the US market – is happy with the move because it will effectively remove competition, along with the hefty tariff on Chinese imports.

“Representatives of Tesla – by far the nation’s biggest EV maker – have told a Trump-transition committee they support ending the subsidy, said the two sources, speaking on condition of anonymity,” Reuters reported.

The EV tax credit is part of Joe Biden’s Inflation Reduction Act’, and according to Reuters has benefited more than 300,000 EV drivers and saved consumers over $US2 billion so far this year. Even the industry trade group supports it and has urged the Trump transition team to keep them.

The IRA provides a tax credit of up to $7,500 for new electric vehicles that meet certain production requirements. The law also provides a tax credit of up to $4,000 for used electric vehicles, which is meaningful as the majority of consumers buy used vehicles. The Biden-Harris administration has ensured these consumer savings can be applied immediately at the point-of-sale.

“Donald Trump’s attack on the EV tax credit would backfire on Americans, robbing people of their choice to buy electric vehicles that are good for our economy, the climate, and clean air,” Sierra Club Director of the Clean Transportation for All campaign Katherine García said in a  statement.

“The Inflation Reduction Act is bringing clean energy to families across the nation while saving people money and investing in communities, including in many Republican districts. The Sierra Club will fight tooth and nail with industry allies against any effort to repeal these incredibly popular tax credits.”

Trump has said that EVs would “kill” the U.S. auto industry, describing shift to electric cars as a “transition to hell”, and reportedly offered to gut pro-EV regulations in return for the oil lobby’s support for his candidacy. Vice president elect J.D. Vance has described EVs as a “scam.”

Musk, who quit Trump’s advisory council in his first term over his decision to quit the Paris Treaty, and who – Electrek reports – now views the “woke mind virus” as a bigger threat to humanity than climate change, has indicated he has no problems with the ditching of the tax credit.

That’s probably because Tesla has just about exhausted its access to them. Musk has also been appointed co-head of the new Department of Government Efficiency by Trump, with a promise to slash government spending.

“I guess that there would be some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Musk told analysts in an earnings call in July when asked about the likelihood of EV tax credits being rescinded “But long term, [it] probably actually helps Tesla.”

On Thursday, Musk wrote on his platform X, with Trump-style caps: “ALL government spending is taxation. This is a very important concept to appreciate. It is either direct taxation, like income tax, or indirect via inflation due to increasing the money supply.”

Musk is apparently now more interested in autonomous cars, or RoboCabs, than he is in EVs driven by humans. To do that, however, will require the approval of regulatory authorities, whose budgets he may well have an influence over, at least at the federal level.

The prospect that he will be successful has underwritten a 40 per cent surge in Tesla’s market value over the past week, adding $A500 billion to its market cap before falling back slightly over the last two days.