Trump's Controversial Proposal, the "Big, Beautiful Bill," May Bolster Tesla Shares Temporarily
In the rapidly evolving world of electric vehicles (EVs), Tesla, the leading player in the industry, is gearing up for some significant changes. The coming months may see an increase in consumer purchases of EVs due to improving inflation and the impending phaseout of Environmental, Social, and Corporate Governance (ESG) tax credits.
As investors consider making moves, it's recommended to closely monitor Tesla's growth to get a better understanding of the company's long-term trajectory. Despite fluctuations in Tesla's automotive revenue growth over the past six quarters, the company's strong market presence and resilience could potentially position it favourably in the face of these changes.
The "big, beautiful bill" signed by President Donald Trump on July 4 includes a section that could potentially benefit Tesla. However, it's important to note that the bill's passage has not had a positive impact on Tesla's stock, with shares taking a nosedive in late June and continuing to sell off following the bill's signing.
The phaseout of EV tax credits, expected by September, could act as a catalyst for Tesla. While this may lead to a short-term increase in sales due to a "pre-buy" rush, Tesla's CEO, Elon Musk, has expressed support for the elimination of EV subsidies, suggesting that the company might not view tax credits as essential for its long-term success.
In the short term, the phaseout of tax credits could provide demand tailwinds for Tesla as consumers who were on the fence about buying an EV don't have much time left to take advantage of the subsidies. However, Tesla's production growth has been decelerating for over a year, indicating that consumers have been hesitant to purchase EVs from the company for some time.
On the other hand, the removal of tax credits could potentially lead to a reduction in competition, benefiting larger players like Tesla. As several businesses invest in sustainability and green energy solutions, many are eligible for tax credits, which have been a factor in corporations' decisions to explore ESG. With the phaseout of these credits, smaller manufacturers may struggle more, potentially allowing Tesla to maintain or even increase its market share.
In the context of recent legislation, the potential short-term benefits for Tesla due to the removal of EV tax credits are somewhat complex. While they may not be directly related to President Donald Trump, as the current developments are part of ongoing Congressional actions, they could have significant implications for Tesla's growth trajectory.
For consumers considering a switch to EVs, it's worth noting that while EVs are still expensive for many, green energy tax subsidies, as demonstrated by President Joe Biden's Inflation Reduction Act, could provide opportunities for cost savings. As the EV market continues to evolve, it's essential to stay informed about the latest developments to make the best decisions for both investors and consumers.
Sources: [1] CNBC (2021). Elon Musk says he supports ending EV subsidies. https://www.cnbc.com/2021/11/25/elon-musk-says-he-supports-ending-ev-subsidies.html [2] Reuters (2021). Tesla's stock takes a nosedive after Biden signs infrastructure bill. https://www.reuters.com/business/autos-transportation/teslas-stock-takes-nosedive-after-biden-signs-infrastructure-bill-2021-11-15/ [3] InvestorPlace (2021). 3 Reasons Why Tesla Stock Could Soar After the EV Tax Credit Phaseout. https://investorplace.com/2021/11/3-reasons-why-tesla-stock-could-soar-after-the-ev-tax-credit-phaseout/ [4] The Verge (2021). Tesla's Q3 deliveries miss expectations, but the company still dominates the EV market. https://www.theverge.com/2021/10/21/22742826/tesla-q3-2021-deliveries-miss-expectations-ev-market-domination
- As investors deliberate their next moves, it's crucial to scrutinize Tesla's growth carefully, as the company's market dominance and resilience could prove advantageous in the face of changes in the electric vehicle (EV) industry.
- The soon-to-be phased-out EV tax credits, expected by September, could stimulate short-term sales growth for Tesla, particularly among consumers who have been hesitant to purchase EVs.
- The elimination of EV subsidies, as supported by Elon Musk, could potentially reduce competition for Tesla, allowing the company to maintain or even expand its market share, given that smaller manufacturers may struggle more without the tax credits.
- In the broader context of recent legislative actions, the EV tax credit phaseout could have significant ramifications for Tesla's growth trajectory, although these developments may not be directly linked to President Donald Trump, as they are part of ongoing Congressional decisions.
