Tesla, Musk face $3.2b blow as Trump targets EV subsidies

Incoming US President Donald Trump could be about to wipe billions of dollars from Tesla and ally Elon Musk’s bottom line.

Tesla is facing financial trouble under the second Trump administration, despite CEO Elon Musk’s close ties to the incoming president.

JP Morgan analysts have warned the electric vehicle (EV) giant could lose a staggering $3.2 billion if proposed cuts to EV tax credits and subsidies are implemented by Trump.

The financial service firm’s analysts estimate Trump’s plans to eliminate EV tax incentives could slash Tesla’s profit margins by as much as 40 per cent.

“Tesla does not appear to us on track to dominate the global auto industry amid the electrification transition, which we view as only the starting point for present valuation,” analyst Ryan Brinkman wrote in a note to clients earlier this month.

The automaker recently reported a decline in annual vehicle sales for the first time since becoming a leader in the EV market, selling 1.79 million cars in 2024, slightly down from 1.8 million the previous year.

The dip was also reflected in a sharp 6 per cent drop in Tesla’s share price last Thursday.

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JP Morgan predicts Tesla will face financial trouble despite Musks’ close tie with US President-elect Donald Trump. Picture: AFP

Despite the numbers, Tesla is still the largest EV seller in the world but only by a small margin.

China’s Build Your Dreams (BYD) saw a huge increase year-on-year and sold 1.76 million EVs in 2024.

However, Mr Brinkman warned investors that the overall EV results should serve as a wake-up call as demand softens and policy shifts take effect.

“The slowing of deliveries, even ahead of a likely subsidy removal, we think has the potential to refocus investors on the deterioration in deliveries, revenue, gross profit, EBIT, EPS, and FCF estimates across all periods,” Brinkman wrote.

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A JP Morgan analyst has warned investors that the recent dip in annual sales and stock market should serve as a wake-up call for Musk and Tesla executives. Picutre: AFP

Just last November, Musk stated he supported Trump’s plan to cut EV subsidies.

Musk argued that removing EV subsidies would benefit Tesla and create a level playing field with competitors.

Yet Tesla has long been reliant on regulatory credits as a reliable income stream.

Tesla profits by selling these credits to competitors who fail to meet emissions standards.

Investors had initially celebrated Musk’s relationship with the incoming Trump administration, with stock surging 63 per cent post-election.

Despite the turbulence, Tesla shares rebounded slightly last Friday, rising by 4 per cent to close at $410.44.

Originally published as Tesla, Musk face $3.2b blow as Trump targets EV subsidies