The $7,500 EV tax credit officially expired at midnight on September 30, leaving many to speculate about the future of EV makers in the United States. One company that stands to thrive without the tax credit is Tesla, which could see brighter days ahead starting with Q4.
Here are five reasons why Tesla might actually be in better shape without the tax credit:
- No Tax Credit Means Price Cuts: With the tax credit gone, Tesla will have to adjust its pricing strategy. In the past, when the tax credit reached its cap in 2019, Tesla surged sales by offering a more affordable model, the Model 3. This time around, Tesla could use its manufacturing and technological efficiencies to increase affordability and potentially introduce price cuts.
- The Playing Field Becomes Fairer: While companies like Ford and General Motors have also benefited from the tax credit, their EV projects are not as profitable as Tesla’s. Without the tax credit to mask high production costs and dealer markups, competitors may scale back their EV efforts, giving Tesla a competitive edge.
- Tesla’s Maturity Shows and Investor Confidence Will Boost: Tesla was once seen as a subsidy-dependent startup, but the company has proven its ability to be self-sufficient over the years. The cancellation of subsidies will highlight Tesla’s maturity and could boost investor confidence in the company.
- Subsidies Sometimes Can Inhibit True Innovation: Without government subsidies, companies may feel more pressure to innovate and improve their products. Tesla achieved major breakthroughs after the tax credit ended in 2019, such as the Cybertruck and energy storage projects scaled to gigawatt-hours. The absence of subsidies could drive Tesla to continue innovating.
- Affordable Models Will Be Even More Sought After: Tesla is set to launch affordable models this quarter, and without the tax credit, these cars will be highly sought after by consumers. If Tesla can offer a model close to $30,000, it could regain market share from competitors offering less affordable EVs.
In conclusion, the expiration of the EV tax credit may actually benefit Tesla in the long run. The company’s ability to adapt to changing market conditions and innovate without relying on subsidies could position it as a leader in the EV industry. Investors and consumers alike will be watching closely to see how Tesla navigates this new landscape.