Tailing off Tesla's sales, a major income avenue faces depletion
The federal Electric Vehicle (EV) tax credit programme, which offers up to $7,500 for new EV purchases, is set to conclude on September 30, 2025. This earlier-than-expected deadline is a result of the enactment of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.
This accelerated timeline means that only vehicles delivered by September 30, 2025, will qualify for the credit. The government is capping overall EV incentive liabilities to redirect funding towards infrastructure and energy independence projects.
Tesla, a company that has historically benefited from selling regulatory credits to other automakers to comply with emissions standards, may experience a significant impact due to the end of the EV tax credit. The expiration could influence consumer demand for Tesla’s vehicles by removing a key financial incentive, potentially slowing sales growth for the company. This could indirectly reduce the volume of regulatory credits Tesla can sell, as their model mix and sales volume affect credit generation.
However, Tesla’s regulatory credit revenue depends on demand from other automakers needing credits, which may persist despite the tax credit phase-out. The exact timeline for the regulatory credit program's end is less clear since credits are tied to emissions regulations rather than the tax credit program specifically.
The conclusion of the EV tax credit by September 2025 could signal a turning point in Tesla’s credit revenue trajectory, likely reducing this revenue stream going forward. The company, which has relied heavily on the EV regulatory credit programme over the last decade, earning over $10 billion, should expect a reduction in regulatory credit revenue post-2025.
Tesla's financials could be significantly impacted by these changes, with steep declines over the past year and sales down worldwide, despite its recent expansion into new markets like India. Sales in California, once the hub of Tesla’s popularity, have seen a decline for the seventh consecutive month.
The independent review by analysts at William Blair predicts a significant decrease in Tesla's EV credit revenue, with estimates for 2025 reduced to about $1.5 billion. The review also expects Tesla's EV credit revenue to further decrease to $595 million in 2026 and be wiped out entirely by 2027.
Elon Musk's political activities have drawn criticism, with his feud with President Trump largely due to the elimination of the EV regulatory credit programme. Musk has been highlighting Trump's former ties to Jeffrey Epstein as part of his feud with the president.
Despite these challenges, Tesla has made a series of desperate maneuvers to stave off a collapse of its business, including rolling out special offers to drivers. The company's 2nd quarter earnings report is expected to bring more bad news.
The EV regulatory credit scheme has allowed many big-name automakers to continue with business-as-usual, and has helped Tesla get through tough times, including a potential bankruptcy in 2019. However, the programme's end could mark a new era for the EV industry and Tesla's financial future.
- The ending of the EV tax credit in September 2025 might signals a shift in Tesla's revenue trajectory from regulatory credits, as the company has earned over $10 billion from this program over the past decade.
- Elon Musk, Tesla's CEO, has been involved in a political feud with President Trump, largely due to the elimination of the EV regulatory credit program.
- The independent review by analysts at William Blair predicts a significant decrease in Tesla's EV credit revenue, with estimates for 2025 reduced to about $1.5 billion, and further reductions to $595 million in 2026 and nothing by 2027.
- Tech outlets such as Gizmodo are discussing the potential impact of the ending of the EV tax credit on the general-news landscape, including politics and finance, as it could influence the future of the tech industry, particularly in the realm of electric vehicles.
