There’s this concept of a “Joker origin story” that implies something terrible happens to turn someone into the Joker. It might be the failure of the social safety net, a harsh chemical accident, the murder of a spouse, or, in many versions, the Joker’s failure to become a popular standup comedian. If GM CEO Mary Barra is going to turn into the Joker it might be the Trump administration that finally does it.
Yesterday, an exclusive report came out indicating that one of the priorities in the next Trump administration is the elimination of the $7,500 tax credit for electric vehicles. Given that much of the Trump administration’s plans read like some sort of Marjorie Taylor Green fan fiction (RFK Jr heading HHS, a DOGE commission, Matt Gaetz as AG) this is another clear sign that Tesla CEO Elon Musk is getting his way.
Is this bad for Tesla? It’s a little bad for Tesla, but it’s so bad for everyone else that it could be borderline existential for some automakers. What are they going to do? If you’re Hyundai, you’re going to make your North American boss the boss of the whole darn company. Ford? I’m not sure. Ford’s in a weird position, and it’ll be about $165 million short as it has to pay the second-biggest fine in NHTSA history.
That’s enough politics for The Morning Dump. I just got the latest update on vehicle inventory and it looks like the big incentive drive Stellantis is on is finally working.
The IRA Tax Credit Repeal Is Quite The Concept
With apologies to David, I’m feeling in the mood for pop culture references. If you’ve never seen The Princess Bride or read the book, please stop now and go do one or both of those things. I think The Princess Bride is one of those rare instances where the book is better than the movie and, simultaneously, the movie is better than the book.
There’s a famous scene where, faced with a crafty but diminutive Sicilian mercenary, the Dread Pirate Roberts challenges the mercenary to a battle of wits. The pirate says he’s put a little poison in one of two wine goblets and the Sicilian will have to reason out which goblet contains poison. At the last minute, the Sicilian switches the goblets and takes a drink, assuming he’ll live.
If you’ve watched the movie you know what happens next. Both goblets contained poison, it’s just that the Pirate had built up a tolerance for it and so wasn’t seriously harmed.
This is as apt a metaphor as I can come up with for President Trump, with the support of Tesla, saying he’ll end the $7,500 federal tax credit for electric vehicles produced in the United States. Tesla’s most popular vehicles all take advantage of the $7,500 instant tax rebate and it will, likely, depress the company’s car sales. This is a little bad for Tesla. It’s way, way, way worse for everyone else.
Tesla is the most efficient electric automaker in the world if you look at the company’s margins and production and it got here thanks to years and years of government subsidies. The success of Tesla isn’t just the genius of one lone businessman, it is the genius of the American taxpayer, who has repeatedly backed the company indirectly with carbon credits and directly with loans and tax credits totaling billions of dollars. One could argue that America made Elon Musk the richest man in the world and the benefit we get, as taxpayers, is an extremely competitive global automaker who builds some of the best cars, including many in America.
This doesn’t make Tesla different or more special than any other American automaker as they all, historically, have benefited from tax breaks, loans, and many of the same tax credits that Musk got. The difference is that Musk spent that money much more strategically, first to build a bunch of successful companies, and more recently to buy immense influence with a President and a political party.
I want to be careful not to overstate the impact of the $7,500 tax credit, which prioritizes American-made cars over cars made anywhere else. Carmakers were already planning to build electric cars before the tax credit, which came as a bit of a surprise, and this planning had less to do with government incentives and way more to do with the general mania over electric cars( Remember, the initial EV tax credit, which benefited Tesla greatly, was designed to phase out after 200,000 cars). What’s important about the tax credit is that, now, in an EV market that’s slowing down, it helps keep the efforts of these companies alive.
If you’re a major automaker like Toyota, which has tentatively made electric investments but has a lot of hybrids, this isn’t fatal. You’ll be fine. If you are one of the many, many companies that use the discount to take $7,500 off a lease this hurts a lot. If you’re a company like Hyundai that uses the leases and is already pretty far along in building a plant I don’t know if you’re going to stop or go forward.
General Motors, of all automakers, is maybe hurt the most. The company was so close to being profitable producing electric cars on the backs of this discount and it going away is going to suck. I’m curious to see the guidance the company gives if this actually happens. Ford’s been planning a cheap, skunkworks electric car, but does that happen in this environment? Probably. There’s a slow inevitability to electric cars, it’s just a question of how slow it gets. You can critique companies for basing decisions on politics and government incentives, which is fair, though I’m not sure there’s a large company on the globe that doesn’t at least have to consider these when planning for the future and they’re supposed to provide stability during transition periods.
Tesla, though, thinks it’ll be fine if this happens. Reuters broke the story, so I’ll let them explain:
Musk himself pointed out as much in a July earnings call, saying losing the subsidy under Trump would “probably benefit Tesla” in the long term.
Tesla sold just under half of all U.S. EVs in the third quarter, according to data from Cox Automotive. Other automakers with notable EV sales such as GM, Ford and Hyundai, individually trail far behind. But Tesla’s U.S. EV rivals collectively have steadily eroded its market share, which exceeded 80% in the first quarter of 2020.
Nicholas Mersch, portfolio manager at Purpose Investments, a Tesla investor, said Tesla can withstand a potential sales hit from losing subsidies because the automaker’s “engineering and manufacturing prowess” lowers its costs.
“Getting rid of the subsidy means that competitors can’t catch up and won’t be able to compete on a cost basis,” Mersch said
This can’t be a surprise to anyone as then-candidate Trump said he’d do this exact thing in August.
The politics of this are extremely whacky. In spite of voting against the Inflation Reduction Act, many Republicans are quite happy with all the jobs the IRA has created disproportionately in Republican districts and states. In fact, here’s a letter signed by a bunch of Republicans in Congress stating they’ll block any reductions to tax credits:
Today, many U.S. companies are already using sector-wide energy tax credits – many of which
have enjoyed bipartisan support historically – to make major investments in new U.S. energy
infrastructure. We hear from industry and our constituents who fear the energy tax regime will
once again be turned on its head due to Republican repeal efforts. Prematurely repealing energy
tax credits, particularly those which were used to justify investments that already broke ground,
would undermine private investments and stop development that is already ongoing. A full repeal
would create a worst-case scenario where we would have spent billions of taxpayer dollars and
received next to nothing in return.
The Inflation Reduction Act is an imperfect bill that feels like only 80% of what was necessary if you really wanted to reform our car sector or make non-Tesla automakers competitive, but it was better than nothing. Pulling the plug now on this and other environmental credits is, as the Republicans themselves say, “a worst-case scenario where we would have spent billions of taxpayer dollars and received next to nothing in return.”
We wouldn’t get anything, but Tesla would. It’s as if the industry was stranded on a small island that was submerged every night by a rising tide. We all funded the building of a platform and a rope ladder to get everyone to safety and Tesla was the first one to make it to the top. Rather than try to help everyone else make it up the ladder, we’ve just given Elon Musk a pair of scissors.
For many car dealers, this isn’t an issue, but for others, the tax credits are a big deal. While carmakers have, via its trade group, pushed for a reduction in greenhouse gas requirements, which Trump has signaled he’ll give them, they’ve also largely signaled support for the $7,500 tax credit.
Could this pass? I’m not a political reporter so I don’t know.
While Republicans took control of both the Senate and the House of Representatives, they did so only narrowly and will require broad support from all ends of the party to be successful in passing legislation. If it were a matter of just repealing a bill this seems like a stretch. However, I think America is about to again be introduced to the concept of “reconciliation” which allows a lot of budget-related bills to be passed without going through the normal process. It is, somewhat poignantly, how President Biden snuck the IRA through Congress the first time.
Again, I don’t know what happens, I just know that Elon Musk said it would be a little bad for Tesla and extremely bad for everyone else, and, in this case, I’m inclined to take Elon Musk at his word.
Jose Muñoz Becomes First Non-South Korean To Head Hyundai Motor Company
In my few interactions with Joze Muñoz as head of Hyundai and Genesis in North America I’ve found him to be polite, affable, and able to explain his goals in a simple and straightforward way. Hyundai has been quite successful here in North America and it was no surprise when he was elevated to COO of the global company. It’s even less of a surprise that now, in the incoming Trump era, that Munoz has been tapped as CEO of the whole thing.
From the company:
Muñoz will oversee the execution of the company’s customer-focused vision of ‘Progress for Humanity’, building on its leadership position in next-generation mobility, including electrification, diversified powertrain offerings and hydrogen technology. He will also focus on advancing the company’s global management system to further strengthen Hyundai Motor’s status as a global brand.
It’s going to be a tough gig, but Hyundai feels like it’s in a good position relative to many other automakers.
Ford To Fork Over Up To $165 Million For Slow Recall
Ford’s on the hook for up to $165 million in NHTSA penalties for its response to a recall involving malfunctioning backup cameras.
The three-year consent order agreed to by Ford and the NHTSA includes a civil penalty of up to $165 million, which is exceeded only by the Takata air bag consent order in the regulatory agency’s 54-year history. An investigation that began in 2021 found the company didn’t recall vehicles with defective rearview cameras in a timely manner or provide accurate and complete recall information as required by the National Traffic and Motor Vehicle Safety Act.
It’s not all bad. If Ford doesn’t screw up they’ll get $55 million back and the company also gets to put $45 million of investment into making sure this doesn’t happen again.
Ram Isn’t The Worst Anymore
Stellantis has been tighter than Bill & Ted with its incentive spending this year, but that’s finally changing and, shocker, they’re selling cars. Above is the Days Supply chart from Cox Automotive showing how many days of inventory various brands have. That’s from this summer.
Here’s the new one:
Now only Jaguar is so bad that it literally doesn’t fit on the chart anymore, but Jaguar partially has to do that because it’s not making new cars for a while. Ram, while still not great, is at least not not great enough to fit on the chart!
What I’m Listening To While Writing TMD
Here’s B.B. King doing “Sweet Little Angel” live. Untouchable. It’s so beautiful he starts to cry in the middle of it.
The Big Question
Who is screwed the most and who is screwed the least in this deal? Do you think they’ll do it? Are EV incentives a waste anyway?
Regarding EV incentives… we all knew they would go away eventually. It’s just that with Crooked Trump coming into office, it’s happening a little faster.
And this is another thing that absolutely NOBODY should be surprised about when they voted for Crooked and oil-owned-Republican Trump/
And really, if other OEMs like Nissan, Ford and GM wasted their past credits on stupid compliance cars instead of working toward building high volume BEV platforms for their next-gen vehicles, that’s their own fault for taking too long to take BEVs seriously.
If I was a legacy car maker, I would focus on supplying vehicles in segments that Tesla doesn’t yet compete in or doesn’t directly compete in.
For example… Tesla still doesn’t make a van, minivan, conventional pickup truck, convertible, sports car or a small hatchback.
And in the commercial field, the Semi is still being produced in low volumes. And that is a Class 8 truck. There is plenty of market space for other OEMs to tackle.
And don’t forget other segments like transit buses, school buses, airport shuttles, etc.
But the fact remains that there ARE companies that can successfully compete with Tesla like BYD
In light of that fact, if I was in charge of a legacy OEM in the USA, I’d be talking to a company like BYD about a long-term joint venture that would involve jointly producing vehicles and sharing tech and production facilities to get around the proposed tariffs.
“Tesla is the most efficient electric automaker in the world if you…”
…ignore the fact that they don’t give a shit about the quality and functionality of what goes out the factory doors.
There – Fixed for ya.
Easy; the consumer and taxpayer gets screwed “as it was in the beginning is now and ever shall be world without end”, amen.
I’m not so sure that the other OEMs are as screwed as Musk would lead you to believe. Certainly in a world that is dominated by EVs but that is very much not the reality we are in nor the one the next administration will pursue. Sure EV sales will take a hit but they are just as likely to go buy a ICE Blazer instead of a Model Y if they can’t get the EV tax credit. Others appear to be making serious progress on the cost of EVs front as well. Ford is fast tracking an affordable EV, Kia/Hyundai have a few on the way, the Equinox EV already on sale is cheaper than anything Tesla makes and GM has an even cheaper Bolt (Bolts?) on the way soon. Are we just taking Tesla at their word this is good for them and bad for others? Elon could be making a critical mistake with this. His thoughts probably don’t actually matter as the 7500 tax credit would have likely gone away under Trump anyway.
TLDR: I’m not sure this is the boon for Tesla Musk keeps saying it is.
THIS
The credit is artificially inflating EV purchases beyond what the market would naturally support. Removing it hurts EV sales and probably shrinks the market (compared to what it would be with incentives), but those sales don’t disappear, they’re just non-ev sales now.
So, anyone that offers both will have some offset. Anyone who sells EVs only will see it go away completely. Who is worse off?
Not to mention, when a market contracts it’s the entity with the largest market share that gets hit the most (in absolute dollars). And that’s Tesla.
I don’t believe a thing Elon says, he’s just pumping stock.
It will be a boon to Tesla when CARB mandates for EVs begin kicking in about a year from now, and, who won’t be able to come even close to meeting the requirements? Toyota. Toyota will have to spend a lot of money buying credits in order to keep selling cars in CARB states. And who will have lots of credits to sell? Tesla. Obviously it’s not just Toyota and Tesla at play here, but, cancelling the federal tax credit would have a huge impact on the value of EV credits. Sure, Tesla might have fewer of them to sell with smaller sales numbers, but, I’m pretty sure their credits would be massively more valuable, because they’d be nearly the only ones with any to sell.
My takeaway from the Musk story is that the last 2 years have been physically rough for him, he looks so much better in that stupid Twitter sink pic than he does now.
13 active FBI investigations will do that to you.
“Are EV incentives a waste anyway?”
I don’t know about a waste, but I’m not a fan of EV tax credits in their current form so I have mixed feelings about them going away.
I like that the credits subsidized EV development while giving the appearance of subsidizing purchases for consumers. It was a clever way to avoid the negative publicity that comes with handouts to corporations. I think it was reasonable to subsidize EV development, so I like that politicians found a politically palatable way to create these subsidies.
While I like that EV development was subsidized, I am concerned these subsidies brought EVs to the masses prematurely. EVs are still best for early adopters who will know and understand their limitations. I have talked to several EV owners who were disappointed with charging time, charger availability, and range, and as a result have or intend to switch back to ICE vehicles. It is hard to see these people considering another EV any time soon. EV tax credits might have helped sales initially, but I wonder if these credits might have hurt EV adoption over the long term?
Also, I don’t like the income limits. If it is important to replace ICE vehicles with EVs for climate reasons, why limit who can get the credit? Emissions from wealthy drivers are just as harmful as emissions from middle class/working class drivers. The income limits disincentivize EV purchases for wealthier buyers who might otherwise want them.
Plus, the income limits were too low. $7,500 is a non-trivial amount of money for many buyers who were ineligible for the credits. A single person making $150,000 is not the same as a billionaire. Having to pay $7,500 more for an identical product is enough reason for me to not want to buy that product, even if I can realistically spare $7,500.
The income limits for used EVs are even worse. For those above the limits (which may be the majority of single individuals shopping for an EV in addition to a substantial fraction of married individuals), it is hard to tell what price you are going to pay for a vehicle. Deceptive advertising is common in car sales, but advertised prices for used EVs often have no relationship to the price you will actually pay (worst example I saw was a $13,000 advertised price with a final price tag of $29,000). Shopping for a used EV is so frustrating I could see potential buyers opting for an ICE vehicle instead.
Overall, I don’t think the EV tax credits were a waste. I’m just concerned the implementation of the tax credits might have turned a good thing into a bad thing.
You said it much better than I did. I agree with everything you said!
As with all policy, it’s crucial to judge a program by its outcomes rather than its intentions. You point out some very valid considerations!
I like your points. To add to the income limits, higher income individuals are more likely to have a less efficient ICE car so it would be even more prudent to get them into a zero emissions EV, instead.
higher income individuals are more likely to have a less efficient ICE.
Where do you get that from? Most rich people I know drive 1-3 year old cars. Much more efficient then the 10-15 year old cars I drive. By a lot.
Unless you are suggesting that all rich people drive Gwagens or something.
Yeah, I think this talking point is a bit out of date.
Sure, an S class or Escalade isn’t very efficient, but a rich person these days is just as likely to drive a Tesla or a modern hybrid.
Lower income people don’t drive new compacts, they drive old and inefficient SUVs.
“A single person making $150,000 is not the same as a billionaire.”
For that matter, a single person making $150K in Los Angeles is not the same as a single person making $150K in Central Virginia.
The income caps are only to try to mitigate the cries of ‘it’s a handout for the rich!’ It’s bad and counter-productive, but, it’s political reality in a poorly-educated populace that image matters, and EVs are already seen as ‘rich-people playthings’ by a lot of people who will never be able to afford a new car. I agree wholeheartedly – someone making $150k should not be buying an $80k vehicle (or even a $55k vehicle), and it’s similar for the used credit – a $25k vehicle is probably ill-advised for most people making under $75k. But, I understand why the limit is there.
The Marjorie Taylor Greene fan fic comment is pure political commentary and brings nothing to the car discussion and questions/concerns raised by the incoming President and Co.
Political commentary that does not progress the automotive commentary I believe crosses the line of where the Autopian has stated it wants to be. Political comments should only be here when necessitated by the actual automotive news.
We had a whole long conversation about that specific line and my point in mentioning that is to point out that this is part of a long list of items that Trump indicated he might do that some considered were maybe hyperbole. News commentary is about context and while not debating the merits of any of President Trump’s choices, which mostly don’t impact car enthusiasts, I think it’s important to put them into some sort of perspective.
We can agree to disagree that the line goes beyond context and becomes opinion commentary. I appreciate the line was given discussion before publishing.
We can also agree to disagree that pointing out that MTG is batshit crazy is not opinion commentary.
I never said she wasn’t… her crazy is what makes my point.
Ms. Jewish Space Laser being batshit is a 6-sigma fact.
I will say, that sentence also stuck out to me as much more of a political opinion than context and I was also surprised to see it included. My measure of “getting a little too political” is if someone can clearly tell where I sit on the political spectrum with the comment, maybe it’s too far. It’s a funny line, but it’s political opinion.
Ok, noted. For me, it’s sometimes easier to just shorthand things with a joke or a wink than to try and spell them out, but I don’t want it to be a distraction.
The original line was “MAGA fan fiction,” which I didn’t like, as that term is a pretty loaded one. Perhaps this wasn’t an improvement.
Maybe the move in the future is to just to discuss political things in a straight up manner (basically what Matt wrote in his comment here) instead of trying to be silly with it.
We’re doing our best, and we’ll work hard to continue improving how we handle such topics. Thank you for your feedback.
(For the record, I personally don’t care about any of this. Not that I don’t recognize its importance, but I just find it boring, especially compared to cars. Glorious, glorious cars).
I’d like to see the credits decrease and be phased out in a predictable manner as battery prices drop and development costs are covered. Yes, the incentives sell more EV’s, but the credits go to people that I would say are mostly middle class and up. It’s taxpayer dollars and printed money that we are all paying for. I also never liked the original plan that had caps per manufacturer. It should have been a cap for the industry so it encouraged competition for those incentives.
The one I want to see go is the incentive on leases for all EV’s and not just the ones with enough US content. This should have been corrected to apply to the same cars that the purchase incentives go to.
I’ve bought 2 used PHEV’s so I benefited indirectly from these incentives in lower prices for my used cars, but I see little benefit personally with buying a new EV regardless of incentives.
Permit me a rant:
The whole point of spending my money on this website was to provide a measure of escape from the realities of the rest of the world. To enjoy David Tracy and Company’s various actual car enthusiast postings. I want a happy place where I can read about a man who is living in the back of a Pontiac Aztek, because this is what I came here for.
Yes, government will continue to do its thing with the automobile industry. I accept this. The daily machinations of government policy – however tedious – will continue to be news, because content is king in the land of the internet news cycle.
This is a business. I understand that. You need engagement. I’ve seen what this model does when taken to its logical conclusion. I tolerated the continued presence of the other man’s face pasted all over this site because he at least nominally runs an actual car company (though I wish you could do to him as you do to pictures of Carlos Tavares).
Which is to say (excuse the language):
If I have to look at that fucking man’s face daily for the next four years in a place where I come to escape the unpleasantness of whatever larger machinations are going on in the world, I will not be renewing my subscription.
Best regards,
My Other Car is a Tetanus Shot.
OK, we’ll remove the face from the topshot.
We didn’t include it there for engagement (in fact, I had reservations about it, and should have voiced them), but we figured it made sense given the topic.
But we hear you, and we’re ditching his mug here and in the future.
Amazing replacement topshot.
But the original smiling face did look like he might have been making a morning dump. The new topshot is great though.
Have you considered skipping TMD, while enjoying the rest of the site?
Howdy!
A rebuttal:
I understand the various editorial tensions that exist and am sympathetic to those, and there are legitimate issues to be discussed in the automotive sphere with respect to government.
A deep (perhaps unfair) cynicism pervades in myself with respect to how other websites that have gone down this path have turned out. Fine if I’m not contributing monetarily (hey, free is free), but as a contributing member, feedback as to what I enjoy about this place (or trends I dislike) comes part and parcel. Especially since this website made the conscious decision to be founded under a mantra of a more positive view on automobile enthusiasm.
Given the current state of political discourse, I do not view excessive political association as a positive to discourse on the topic. I want to still like cars for cars. I like the writers here, and want to continue supporting their endeavors in supporting automobile enthusiasm.
I accept that the man is President-Elect, elected fairly. And if that stayed in the political realm, I’d let it go. But sadly, the intrusion of politics into realms beyond seems almost ubiquitous, and fairly exhausting. Would we put George H.W. Bush’s mug paired with an ’89 Ford Taurus SHO on the top shot, had this website existed in 1989?
However, I am glad that this website does respond to its members’ concerns and thank both yourself and David for that.
Cheers,
My Other Car is a Tetanus Shot.
“He’s the President, you’re going to see his face! It’s unavoidable.”
Not quite yet.
And while his face may be on TV from time to time – I can always change the channel or turn it off.
If the whole credit is wrecked, I can see Kia/Hyundai doing pretty well if they want to, since they’re getting into the affordable EV game pretty well. If the leasing loophole is all that’s closed, they’ll be in pretty rough shape until they move production here.
Biden already nerfed the incentives when he insisted they be giveaways to the auto unions. This signaled that politics was more important than the stated goal of making our transportation sector more sustainable.
If the Democrats don’t really care about EV adoption, why should anyone?
You are severely misinformed on how the IRA credits have turned out to work.
Yes, a loophole was invented to undo the damage that ended up helping many EV makers of all nationalities, regardless of what labor force made the cars or which mine in China dug out the lithium.
This just makes the whole thing even more cynical. The politicians get to take credit for saving union jobs while funneling money to Korea and China.
So you’re saying it’s bad when they do X, and bad when they do 1/X?
I am saying that truth is important and people aren’t stupid. When you sell us X and then do Y, people notice and it undermines credibility and gives your opponents ammunition to torpedo the whole thing.
People wrote off the EV credit as a union giveaway because no one sold the vision of a clean, energy independent future and why what would be a better country to live in.
I like EVs, I believe they are more sustainable, and I think they are the future. If I had a good use case I would buy one. Stuff like badly targeted incentives just muddle the message.
I have read a lot of crank complaints about the IRA but the only person who wanted it to be a union giveaway was Joe Manchin, and the Biden administration did an end-run around him.
If the last four years of GOP-led House has taught us anything, it’s that their slim majority means very little. It only takes a few dissenters to thwart their plans, and there are 18 that signed that letter. The GOP may have gone batshit crazy lately, but there are still a few that have their heads on straight enough and value their jobs enough not to piss off their constituencies. Those guys are up for re-election again in two years.
Yes, but see my comment below: most EVs get a tax credit that can be eliminated by administrative action alone.
It also can’t be underestimated that Trump is now technically a lame duck and his endorsements have not always carried weight.
It will be interesting to see who starts looking to a post-Trump future. 2/3 of the Senate doesn’t face election until he’s gone. I’m cautiously optimistic that some of his insane nominations will not get through.
All this is to say, voting down the IRA, with its tangible benefits to red states, is hopefully not in the cards, no matter the rhetoric from on high.
The best thing about Trump getting elected is that it will never happen again…
Or will it? AHHHHH.
Anyone who actually thinks the Constitution will be amended to allow Trump to run again, or that enough of the civilian and military leadership would allow any type of scenario that keeps him in office in spite of the Constitution are not worth listening to IMO.
There are enough reasons to dislike the man or fear for what he will do/allow others to do while in office without resorting to paranoid fantasies.
If he can figure out a way to do it, he will. He has already broken laws and done things he “shouldn’t” be allowed to do but they just let him do it.
I’d be willing to bet anything I own that Donald Trump will not be the president on January 21, 2029.
Amen.
There’s already been significant pushback on Gaetz’s nomination and the request to allow recess appointments. That’s akin to asking the Senate to give up one of their favorite powers as a favor. Getting powerful people to voluntarily stop being powerful is a big ask, and is unlikely to happen.
Reconciliation has to be neutral to or reduce the federal deficit, among other things. The Republicans gamed the system by making the Congressional Budget Office, which determines what qualifies, use “dynamic scoring”. That assumes that tax cuts pay for themselves. Historically, this has not been true.
That said, watching these incoming majorities in Congress work to get anything done will be like watching a pie fight. Everyone gets pied and nothing ultimately gets done.
Gridlock is frequently the best possible outcome for most of DC.
Well GM blew the initial tax credits on marked up plug-in Cruzes(the Volt) and Tesla used theirs on the Model S so…., who’s fault is that? Not fanboying just saying they had their early start and blew it. That the IRA passed and granted more credits was a little surprising when it happened.
But I think this may be healthy as depreciation on EVs is horrible, and part of that is the $7500 off plus any local state incentives right out of the gate. So in 3 years when you’re looking to sell you’re fancy $50k EV with all the fanciness and it’s depreciated down to $20k, did you really save $7500?
Leases it helps but those were working for all car makes not just US built ones, which wasn’t the point of the IRA either.
Stellantis is the most screwed on the PHEV credit front, but I think GM and VW are most screwed on the EV specific credits. GM has had such a tough time with Ultium (no longer her real name) rollout and scalability, that losing the credits that make their cars great lease deals or new purchase options will absolutely throttle sales. Seriously, the only reason Lyriqs seem to be moving is because at $399-499/mo with less than 3k down on a 2-3 year lease, they beat out Rav4s on price. Take away the tax credit and GM will go from losing a bit of money on each unit to losing 5-figures per car. It can be absorbed for a little while, but not indefinitely.
VW is screwed because it’s US sales are already poor, corporate is pushing for an EV only future with no Hybrid models available, and their EV lineup is so poor that without any tax incentives, they WILL sit until heavily discounted by VW themselves. VWs product mix now and forecasted for the future is already struggling, and could not absorb the implications of tax credit hits.
Hyundai and Kia will lose out a bit, but not massively. They’re clearly already content with incentivizing their vehicles on their own, matching the 7500 tax credit for purchases on their own, albeit while still pushing lease deals that are federally subsidized. It would be a hit, but the company is doing well enough with EVs, ICE and Hybrids to be able to absorb it with minimal pain.
Ultimately, the general public will be the hardest hit by far. A loss of tax credits will make EVs far less competitive than they currently are, and many states have hard EV sales mandates that will be impossible to hit. Those will be stubbornly enforced regardless of incentives will cause new car inventory in a large percentage of the US to be a complete blood bath, and certainly drive inflation back up.
Yes, the general public will be hit the hardest – followed by dealers. Bargain hunters have been picking up new EVs on the cheap for a few years while everything else got eye wateringly expensive. Taking that away will be a punch in the face for new car volume and affordability.
There are basically two different tax credits:
That is to say, if #2 goes away but #1 stays around due to Congressional resistance, it benefits Tesla more than everybody else even more, but it doesn’t screw over GM or Ford quite as much.
yeah, for sure, that’s a great point.
I think Hyundai was operating on the assumption the lease credit wasn’t going to last forever which is why they pushed to get their most popular EVs made in the US.
Right. Hyundai is in by far the best position of the foreign automakers but they still have a shit-ton of Ioniqs on the lot that need the lease credit.
Keep in mind, too, that just making the cars in the USA doesn’t qualify the car for #1. It needs a certain amount of North American content and can’t exceed certain levels of Chinese/Russian/DRC content. Also, it has to be under a certain price ($80k for SUVs). So the MB EQS and EQE SUVs, along with the Polestar 3 and Volvo EX90, are all made in the USA but don’t qualify for the credit. The levels of content are designed to get stricter over time, but it’s possible for the new admin to make it stricter really fast.
Why does so much of this feel like the last season of Veep?
Credits are not a waste. They are a driver of industry. I see them as very similar to the per mile payments to the railroads that made the transcontinental connection happen. Would there be a transcontinental railroad without them? Yes, it was inevitable. The credits made the construction feasible much, much sooner than it might have been otherwise.
Oil subsidies on the other hand: Huge waste.
Most screwed? Stellantis.
lol, easy answer. It would be the same if the question was “what if the government gave everyone who bought a Dodge $5000 and a puppy?”