Dj Rivian Has More To Lose If Trump Scraps Ev Tax Credit - Market Talk

Tesla Inc shares are moving lower Thursday following reports that president-elect Donald Trump plans to get rid of consumer tax credits for EVs. Wedbush analyst Dan Ives believes the cuts are actually net positive for Tesla.

What To Know: Trump’s team is planning to squash the $7,500 EV tax credit on vehicle purchases as part of a broader tax-reform plan, according to a Reuters report citing two sources with direct knowledge of the plans.

Getting rid of the EV tax credit could significantly impact the United States’ EV transition efforts, but Tesla CEO Elon Musk, who has been one of Trump’s biggest supporters, reportedly told Trump’s team that he supports putting an end to the EV tax credit.

Why It Matters: Ives, a longtime Tesla bull, explained in a new note to clients on Thursday that the news is not a surprise “in any way,” as Wedbush fully expected Trump to tear down the tax credits upon returning to the White House.

“While this is a clear negative for the EV industry at first look and would particularly hurt GM, Ford, Stellantis, and Rivian... on the flip side we view this as a net bullish move for Tesla and Musk over time,” Ives said in the note.

See Also: Tesla’s Profit Power Vs. Rivian’s Cash Burn: Can The Gap Be Narrowed?

Musk reportedly said earlier this year that removing the EV tax credit could have a slight impact on Tesla sales, but would be far worse for his U.S.-based competitors.

Ives noted that Tesla has unmatched scale. The Wedbush analyst acknowledged that getting rid of the EV tax credit could weigh on demand , but he believes it will actually propel Tesla further ahead of competitors. Comparing Tesla’s pricing, scale and scope to legacy automakers making the EV transition is like comparing apples to oranges, Ives added.

“We expect Musk to have a big seat at the table as these EV discussions happen within the Trump transition team. We believe any sell-off in Tesla from these reports is the wrong knee-jerk reaction and we would be buyers,” Ives said.

The Wedbush analyst maintained an Outperform rating and price target of $400 on Tesla stock following the news.

TSLA Price Action: Tesla shares were down 5.11% at $313.41 at the time of publication Thursday, according to Benzinga Pro.

Read Next:

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Consumer stocks were down late Thursday afternoon, with the Consumer Staples Select Sector SPDR Fund (XLP) down 0.1% and the Consumer Discretionary Select Sector SPDR Fund (XLY) shedding 1.3%.

In corporate news, Rivian , Tesla and Lucid shares were falling past 14%, 5% and 4% in recent Thursday trading, respectively. Reuters reported that President-elect Donald Trump's transition team plans to end the $7,500 consumer tax credit for purchases of electric vehicles.

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Walt Disney shares spiked 6%. The company's fiscal Q4 results exceeded market expectations buoyed by its streaming business, while the media and entertainment giant said it expects adjusted earnings growth in fiscal 2025 year over year.

Consumer stocks were down late Thursday afternoon, with the Consumer Staples Select Sector SPDR Fund (XLP) fractionally lower and the Consumer Discretionary Select Sector SPDR Fund (XLY) shedding 1.1%.

In corporate news, Rivian , Tesla and Lucid shares were falling 14%, 5% and 4% in recent Thursday trading, respectively. Reuters reported that President-elect Donald Trump's transition team plans to end the $7,500 consumer tax credit for purchases of electric vehicles.

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.

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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