Trump side: “We need to secure funding for tax cuts”
Tesla, “Competitors are hit hard” by subsidy abolition
Changes in the U.S. electric vehicle market are expected to accelerate
Photo = AP Reuters reported on the 14th (local time) that U.S. President-elect Donald Trump’s transition team plans to abolish electric vehicle tax credits under the Inflation Reduction Act (IRA). There are predictions that in order to secure the financial resources necessary for President-elect Trump’s tax cut pledge, he will sequentially begin ‘erasing Biden’ after he takes office in January of next year.
Tesla supports abolition of IRA tax credit… Competitors are hit harder
Citing sources, Reuters reported that President-elect Trump’s transition team plans to abolish the tax credit of up to $7,500 (approximately 10.5 million won) provided for the purchase of electric vehicles in the United States. The transition team did not directly mention the electric vehicle tax credit, but said in a statement that the president-elect “will follow through on his pledge.”
According to reports, the energy policy team led by Harold Hamm, founder of Continental Resources, the largest shale company in the United States, and North Dakota Governor Doug Burgum are discussing abolishing the IRA tax credit. Reuters reported that energy policy team meetings were held several times at Mar-a-Lago Resort in Florida after winning the presidential election.
Tesla, the largest electric vehicle company in the United States, expressed its support for the abolition of subsidies to the transition team. This is because it is believed that if the tax credit is abolished, the growth of the U.S. electric vehicle industry will stagnate, but it could deal a bigger blow to competitors than Tesla. CEO Musk, Trump’s biggest supporter, acknowledged the negative impact that the abolition of electric vehicle subsidies would have on the industry during a conference call announcing Tesla’s second quarter earnings last July, but also said, “It is likely that it will help Tesla in the long run.”
Nicholas Mursch, portfolio manager at Purpose Investment, explained, “Tesla cannot beat Chinese electric car companies, but with Trump’s help, it may be able to drive Chinese electric cars out of the U.S. market.” The explanation is that if Tesla reorganizes its manufacturing process to reduce production costs and receives help from President-elect Trump’s high tariffs and trade sanctions against China, it will be able to surpass its competitors in the United States even if subsidies are eliminated.
If electric vehicle subsidies are abolished, it is expected that electric vehicle sales will be immediately affected. It is expected that domestic automobile and battery manufacturers, including Hyundai Motor Company, will also suffer a blow if electric vehicle sales decline. The American Association of Automotive Innovation (AAI) sent a letter to Congress on the 15th of last month urging them to maintain the electric vehicle tax credit. “(The tax credit) is important to solidify the United States as a global leader in future automobile manufacturing,” AAI argued.
Republicans, who control both houses of Congress, take action against the IRA.
During the election period, President-elect Trump frequently criticized the Biden administration’s climate change response policy, IRA, calling it a “new green scam.” He also repeatedly pledged to end the ‘electric vehicle mandate’ policy if he is re-elected. Although it did not specify which policies would be abolished, the transition team judged that it would be difficult to abolish some of the clean energy policies included in the IRA, Reuters reported. IRA funds have already begun to be distributed throughout the country, including Republican-dominated states of Michigan, Ohio, and Nevada, and IRA policies are popular even in Republican areas.
It is reported that the transition team expects that it will receive broad support from Republican lawmakers if the abolition of the electric vehicle tax credit is included as part of a larger tax reform bill, as the Republican Party controls the Senate and House of Representatives. The source predicted, “The abolition of the electric vehicle tax credit could secure trillions of dollars in financial resources necessary for former President Trump’s tax cut pledge.”
Reuters reported that the energy policy team expects the Republican Party to abolish the IRA through a ‘budget adjustment’ process. Unlike regular bills, budget adjustment bills are subject to unlimited debate and are not subject to the filibuster that blocks normal proceedings, and are passed only with a simple majority vote. In 2022, the Democratic Party also went through a budget adjustment process when dealing with the IRA.
Reporter Kim Se-min [email protected]
