Trump's tax plan won't help Tesla, but 2 other EV companies got a stock boost

Rivian and Lucid stocks surged after the House passed Trump's tax bill, which extends 2017 tax cuts and eliminates the $7,500 federal EV tax credit by September 30. Analysts attribute the gains to a relative benefit for these smaller EV makers, as the credit's removal is expected to disproportionately impact high-volume producers like Tesla, which already exceeds the 200,000 unit cap for eligibility. JPMorgan estimates the credit's loss could impact 19% of Tesla's 2024 EBIT and over half of its 2025 profits, exacerbating its sales volume challenges.

Analysis

The passage of a tax bill eliminating the $7,500 federal EV tax credit by September 30 has triggered a significant divergence in the stock performance of US EV manufacturers, with Rivian and Lucid shares rallying as much as 4.6% and 8.8% respectively. This market reaction is based on analyst views, such as from BNP Paribas, that the legislative change will level the competitive landscape by disproportionately impacting the market leader, Tesla. Tesla has already delivered well over the 200,000-vehicle eligibility cap, with 336,000 units in Q1 2025 alone, making the credit's loss a direct headwind. The financial implications for Tesla are material; JPMorgan estimates the tax credit's removal could erase 19% of its 2024 EBIT and, combined with other regulatory pressures, threaten over half of its 2025 profits. While Lucid (3,109 Q1 deliveries) qualifies for the credit and Rivian (8,000 Q1 deliveries) uses a leasing loophole, the market is pricing in the greater relative advantage they gain from the increased pressure on Tesla's sales volume and profitability, especially as it faces increased competition and struggles with deliveries.

Key Decisions for Investors

• Investors with exposure to Tesla should scrutinize forward earnings models, as the imminent loss of the $7,500 tax credit is projected by analysts to directly impact profitability and exacerbate existing sales volume pressures.
• The positive stock reaction for Rivian and Lucid suggests a potential near-term relative value opportunity, however, this improved competitive positioning must be weighed against their underlying fundamental challenges and the broader headwind of subsidy removal.
• It is prudent to monitor the entire EV sector's pricing power and demand elasticity following the September 30 credit expiration, as the removal of a key consumer incentive could signal a slowdown in the overall US adoption rate.