Tesla Stock Plunges Over 3% as Trump Scraps EV Policies
Tesla (TSLA) shares plummeted more than 3% on Tuesday, erasing premarket gains following the inauguration of Donald Trump as president. Trump swiftly revoked 78 executive orders issued by former President Joe Biden, including one that mandated half of new US cars manufactured be electric by 2030.
The reversal sent shockwaves through the EV industry, with other EV stocks also witnessing declines. Lucid (LCID) dropped nearly 7%, while Rivian (RIVN) slid 5%. However, traditional automakers General Motors (GM) and Ford (F) posted gains.
Trump directed his administration to review "unfair subsidies" and "government-imposed market distortions" that favor EVs. The Biden administration had provided grants and tax credits through the Inflation Reduction Act, primarily to red states, to promote clean energy and combat climate change.
Despite the setback, Tesla CEO Elon Musk downplayed the impact on his company. He stated that Tesla's focus on autonomy would ultimately benefit from the policy changes.
Impact on EV Tax Credits
The loss of the EV tax credit, which had been in place since the George W. Bush administration, is not insignificant, according to UC Berkeley economics professor Joseph Shapiro. The $7,500 credit has been a significant incentive for EV purchases.
Tesla's Recent Performance
Despite Tuesday's decline, Tesla shares have surged recently as part of the so-called "Trump trade," which has also boosted crypto-linked stocks. The stock has gained over 60% since Trump's election victory in November.