The GOP tax bill kills a $7,500 electric-vehicle credit - and that's terrible news for Tesla

The GOP tax bill kills a $7,500 electric-vehicle credit - and that's terrible news for Tesla

tesla model x


The Tesla Model x.

  • The GOP tax bill reportedly eliminates a $7,500 federal electric-vehicle tax credit.
  • The credit would go away immediately, not be phased out.
  • The credit has been seen as a major driver of EV sales.

The just-unveiled Republican tax bill will eliminate a $7,500 federal tax credit for electric vehicles.

"The tax credits ... are capped for each car manufacturer at 200,000 units, a limit no automaker has reached thus far," Bloomberg's Craig Trudell wrote Thursday. "Tesla sold about 127,000 Model S sedans and Model X sport utility vehicles through August, according to researcher IHS Markit."

The report indicated that the tax credit would be dropped immediately.

Tesla shares were already plummeting on Thursday after a dismal earnings report for the third-quarter on Wednesday, so the news on the tax bill didn't help. Shares fell 8% to $296 in morning trading.


Chevrolet Bolt 6

Hollis Johnson

The Chevy Bolt.

Tesla includes the tax credit in pricing calculations for new vehicles on its website, enabling customers to compare the total vehicle cost with and without the federal tax break. (The credit can only be claimed if a customer owes money to the IRS.)

The GOP bill doesn't affect various state tax breaks and incentives that apply to electric cars.

General Motors would also face the loss of the tax credit on its Chevy Bolt, an all-electric vehicle that launched in late 2016, and that has sold in far lower volumes so far than Tesla's cars.

With so few EVs sold annually, the boost to federal revenue if the credit goes away would be marginal. However, the tax break has been seen as a major driver for EV sales.


Get the latest Tesla stock price here.