Tesla’s earnings could plummet by around 40% under United States president-elect Donald Trump’s plans to cut electric vehicle subsidies, JP Morgan analysts project.
Trump reportedly aims to end the U.S.’ US$7,500 tax credit for electric car purchases. Tesla CEO Elon Musk is a close Trump ally, and has supported ending the subsidy.
“Tesla appears to have the most to lose from the shifting regulatory backdrop, perhaps to the tune of ~$3.2 billion or ~40% of 2024 Bloomberg consensus EBIT of $8.3 billion,” said JP Morgan analyst Ryan Brinkman.
“With an only flat share of the global auto market in 2024, falling overall share in the US, and falling share of the BEV market in nearly every geography, Tesla does not appear to us on track to dominate the global auto industry amidst the electrification transition,” Brinkman said.
Ending the subsidy “would be devastating for our competitors, and it would hurt Tesla slightly. But long term, probably actually helps Tesla would be my guess,” Musk said in July.
Tesla reported its first annual sales decline in over a decade last year, with its 2024 sales falling by 1.1% compared to 2023.
The U.S.’ National Highway Traffic Safety Administration (NHTSA) is also investigating a Tesla self-driving feature after a series of accidents. Its Smart Summon and Actually Smart Summon functions autonomously bring a car to its user from its parking location.
The agency’s Office of Defects Investigation “is aware of multiple crash allegations, involving both Smart Summon and Actually Smart Summon, where the user had too little reaction time to avoid a crash, either with the available line of sight or releasing the phone app button, which stops the vehicle’s movement,” the NHTSA said.
Tesla’s (NASDAQ: TSLA) share price closed at US$394.36, down significantly from its previous close at $411.05. Its market capitalisation is US$1.27 trillion.
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