• Donald Trump is expected to abandon the $7,500 federal EV tax credit.
  • Elon Musk has previously throws his support behind the removal of EV subsidies.
  • Tesla might need the subsidies more than Musk realizes after sales fell in 2024.

Elon Musk spent more than $270 million to help get Donald Trump into office, likely believing that a Trump-run administration would help his companies, including Tesla and SpaceX. Musk’s personal wealth has soared by over $200 billion since the election, thanks primarily to the surging price of Tesla shares. However, according to one analyst, Tesla profits could fall by as much as 40% this year when Trump steps into the White House.

Ryan Brinkman from JPMorgan believes if the incoming President eliminates the $7,500 federal EV tax credit, which he is widely expected to do, it “poses a significant earnings risk for Tesla”. The EV maker had a strong Q4 but overall 2024 global sales weren’t as strong as expected, with 1,789,226 vehicles delivered, slightly fewer than in 2023. This marked the first time in over a decade that Tesla didn’t increase its annual sales.

Read: Is Time Running Out For $7,500 EV Tax Credits? Experts Advise Buyers To Hurry

According to Brinkman, “the slowing of deliveries even ahead of a likely subsidy removal we think has the potential to refocus investors on the deterioration in deliveries, revenue, gross profit, EBIT, EPS, and FCF estimates across all periods.” He added that Tesla could have the most to lose from the shifting regulatory backdrop and may see its profits fall by roughly $3.2 billion, or 40%.

The analyst added that during the Trump administration, shares of BEVs sales could fall in “nearly every geography,” and suggested that Tesla “does not appear to us on track to dominate the global auto industry amidst the electrification transition, which we view as only the starting point for present valuation,” as quoted by Business Insider. JPMorgan also estimates that in 2024, Tesla’s global share of BEV sales fell from ~15.5% to ~13.7%.

Tesla’s Profits Could Crumble By 40% Under Trump Administration, JP Morgan Analyst Claims

Curiously, Elon Musk has publicly supported the abolishment of the EV tax credit. He believes scrapping the credit will hurt rival brands, including GM, Ford, and Hyundai, which rely heavily on the subsidies to make their EVs more affordable. As Tesla has the first-mover advantage in the EV space and is the current market leader, it can develop and sell its EVs at a lower cost than most of its rivals and – in theory – could grow its share. We shall wait and see if he’s proven right, or whether JP Morgan analyst’s predictions of gloom come to pass.