Trump to Remove EV Tax Credits
One of the core pieces of U.S. President Joe Biden’s Inflation Reduction ACT (IRA) is clean energy subsidies such as the $7,500 electric vehicle (EV) tax credit. Now that Biden has lost and President-Elect Donald Trump is ready to take over, a lot is likely to change, and today is the first concrete evidence of that. Today, information surfaced suggesting that the incoming Trump administration will seek to end the $7,500 tax credit. On the campaign trail, Trump has long been preaching in favor of removing regulations on the fossil fuel industry so that the country can “unlock American energy” while eliminating subsidies for EVs. Trump has explained that he is not against EVs per se, but is against funding expensive subsidies for them. Are the EV credit removal grounds for selling Tesla (TSLA) shares?
Below are 5 Reasons to stay bullish on Tesla, including:
1. The EV Tax Credit Removal is Priced In
Donald Trump has pushed for the removal of EV tax credits throughout his campaign, and once he was elected, investors who have paid attention have already priced the news in. Before the tax credit news, TSLA shares had run $100 in a straight line. In other words, some digestion is to be expected.
Image Source: Zacks Investment Research
2. Elon Musk Comments
Musk has used his X platform to advocate for removing subsidies for all industries, including clean energy. Because Tesla is the dominant EV maker, such subsidies would likely have a more dramatic impact on U.S. EV competitors like Stellantis Ford (F) and General Motors (GM).
3. Tariffs on Foreign Competition
Donald Trump has promised to levy equal tariffs on foreign countries that levy tariffs on the U.S. and are threatening American jobs. These protectionist policies could work in Tesla’s favor as they keep Chinese competition like Nio (NIO) and Xpeng (XPEV) out of the U.S.
4. Livermore Rule
Jesse Livermore’s round number rule says that when a stock breaks through a psychologically crucial round number like $300, it continues to drift higher. TSLA cleared the level last week and continues to hold above it.
5. Lower Rates
Tesla was among the hardest hit companies by Powell’s “hawkish” Fed in 2022. However, with the Fed loosening monetary policy, consumers will have more access to “cheap money.”
Bottom Line
Tesla shares fell after news broke that the incoming administration will seek to remove EV tax credits. However, the news was already priced in and there are several reasons for investors to remain bullish into next year.
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