Two weeks ago, I wrote that the Republican plan to cut electric vehicle incentives may lead to a huge surge in EV sales through the end of the year, but that was based on the plans that had been proposed in the early stages of the bill. As it turns out, the Big Bad Budget Bill (actually named “One Big Beautiful Bill”) ended up cutting the EV tax credits much sooner. They are all ending on September 30, 2025.
So, there should be a big surge in EV sales this quarter, and then … boom. The US EV market is not likely to look very positive for a while after September 30.
Naturally, there’s an assumption some make that automakers can just lower prices once the tax incentives are gone. Though, there’s also a common understanding that automakers’ EV programs are not making profits yet, so that seems dubious. Some Tesla fans think this will actually end up benefitting Tesla — because, presumably, if other automakers have a harder time lowering prices and making sales than Tesla, the EV-only automaker could gain a big advantage in the market again. However … Tesla sales have been dropping and Tesla’s own profit margin has nearly collapsed. So, I don’t think Tesla has the space in its bank account to cut prices itself, and certainly not significantly. More likely than not, Tesla will also be hit and will see its sales drop, perhaps to a truly concerning degree in the US.
We will see how this plays out, but as of now, this looks like very bad news. So much for a big surge in EV sales through the end of 2025.
One has to wonder how Elon Musk is going to respond and act if Tesla sales do drop significantly (more than they already are) in the US as a result of this policy change.
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