Tesla stock was up in early trading Friday, rebounding from a steep drop on Thursday after Reuters reported that President-elect Donald Trump plans to reduce or eliminate the electric-vehicle purchase tax credit, which makes buying most Teslas and other EVs more affordable for most car buyers.
Tesla stock added 2% in early trading. Shares dropped 5.8% on Thursday.
Wall Street's views on the impact of Trump's potential move are mixed.
“Overall, we’re not surprised by this likely move, consistent with Trump campaign promises, with formal repeal likely in 2026….and partial repeal potentially next year, especially with respect to EV Leasing,” wrote Wolfe Research analyst Emannual Rosner.
There are complicated rules for buyers and manufacturers to qualify for a full $7,500 credit. All leased EVs get the full amount though. It’s a loophole in the original law. Removing the loophole is worst for foreign and luxury EV manufacturers, said Rosner, adding Tesla, relatively speaking, is the least affected by coming changes.
“Exactly what we expected,” wrote Wedbush analyst Dan Ives in a Thursday report. “While this is a clear negative for the EV industry at first look and would particularly hurt GM, Ford, Stellantis, and Rivian Automotive. On the flip side we view this as a net bullish move for Tesla and Musk over time.”
Ives says Tesla has the global scale and cost structure to be profitable with the tax credit. Others do not. He’s a Tesla bull, rating shares at Buy with a $400 price target.
Future Fund Active exchange-traded fund co-founder Gary Blackowns Tesla shares. He isn’t as sure as Ives that losing the tax credits is good for the stock. He sees the move as akin to the price cuts in 2022 and 2023 that weighed on Tesla’s profit margins and investor sentiment.
“Cutting EV prices in 2022 and 2023 caused Tesla EPS power to decline by 45%,” wrote Black on Thursday. “It’s more impactful to Tesla since the EV credits are offered on 95% of Tesla’s U.S. business. EVs are still a small percent of legacy [auto makers’] businesses.”
“IRA tax credit repeal is bad for everyone,” wrote Wells Fargo analyst Colin Langan in a Friday report. “Don’t get it twisted, auto makers will lose more money.”
General Motors and Ford Motor don’t make money selling EVs yet. Neither does EV start-up Rivian Automotive. Losing the credit would make turning a profit harder.
Langan rates Tesla, Ford, and GM stock at Sell. His price target for Tesla stock is $125, while his price targets for Ford and GM shares are $9 and $38, respectively. He rates Rivian shares at Hold with an $11 price target.
Rivian Automotive, Inc. shares, which slid 14% Thursday, were down 4.4% in early trading. Ford and GM stocks were down 0.3% and 1%, respectively.
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