Trump's Law Shakes EV Industry: Tesla, Rivian, Lucid Face New Challenges
President Trump's law has significantly impacted the electric-vehicle (EV) industry, affecting leading manufacturers like Tesla, Rivian, and Lucid. The changes, including the removal of CAFE fines and the end of EV tax credits, have altered the financial landscape for these companies.
Tesla, for instance, consistently generates over half of its pre-tax income from selling automotive regulatory credits and earning interest income on its cash. However, with the removal of CAFE fines, the market for these credits is expected to be severely depressed. Without these credits, Tesla would have reported a pre-tax loss during the first quarter of 2025.
Rivian and Lucid, despite their substantial cash piles and brand-name financial backing, continue to lose money as they ramp up operations. The end of the $7,500 tax credit for purchasing a qualifying new EV or plug-in hybrid, and the $4,000 credit for buying a used EV by September 30, 2025, could further challenge their long-term success. These companies were also angling leases of upcoming models to take advantage of the credit.
The changes in U.S. tax policies, particularly the end of EV tax credits and the removal of CAFE fines, have potentially impacted the profitability of Tesla, Rivian, and Lucid. The reduced financial incentive for automakers to meet fuel efficiency targets may lead to fewer EV sales, making it likely that future buyers will opt for traditional gas- and diesel-powered vehicles. The future of these EV manufacturers now hinges on their ability to adapt to this new financial landscape.
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