Why Trump's expected tax credit move could fragment EV market
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The plot is thickening around EV incentives federally and in California, the nation's largest auto market by a mile.
Why it matters: President-elect Trump's expected move against tax credits could slow sales of EVs — tech that Biden officials have made a priority.
The big picture: Here are two new (well, one new-ish) developments...
- California Gov. Gavin Newsom (D) will try to revive state rebates for EVs that lapsed in 2023 if the $7,500 IRA credits vanish, he said Monday.
- A major auto industry trade group, the Alliance for Automotive Innovation, urged Trump to keep the subsidies in a recent letter.
- Reuters first reported on the letter, which provides a broad list of policy goals, late last week.
What we're watching: Whether the powerful auto lobby can influence Trump's posture, and lawmakers' too.
- Killing or lowering the credits' value would require Congress to act, though Trump's Treasury officials could pull bureaucratic levers to make it harder to access.
- It could be in play in next year's Capitol Hill battle royale over expiring Trump 1.0 tax cuts and ways to help finance them.
State of play: Trump's exact plans are unclear, and he's also likely to revisit EPA auto emissions rules.
- Spokeswoman Karoline Leavitt, in a statement, said Trump's mandate includes "stopping attacks on gas-powered cars."
- "President Trump will support the auto industry, allowing space for both gas-powered cars AND electric vehicles," she said.
What we don't know: The size of the rebates Newsom would seek, which his office said would come from California's cap-and-trade program revenue.
- He'd have to work with the state legislature as it deals with fiscal pressures.
The intrigue: Newsom's plan could exclude Tesla, the top EV seller, and others under a potential "market cap," the governor's office tells Axios and others.
- But they emphasized it would be subject to negotiations with state lawmakers.
- Tesla CEO Elon Musk called this "insane" on his X platform, noting Tesla makes cars in California.
Our thought bubble: We could see an even more fragmented EV market if federal subsidies die.
- Other blue states could also look for ways to expand incentives as California, where EVs are over 25% of new car sales, looks to keep boosting the market.
- Another deep thought: Newsom's move has Trump 1.0 vibes, when California and other liberal states looked to counteract Trump's moves on immigration, climate and more.
The bottom line: A fight over EV incentives is brewing on Capitol Hill.
- "Conventional wisdom holds that the EV tax credits are most at risk. That is probably right," Capital Alpha Partners' James Lucier said in a note.
