Tesla shares dropped sharply on Thursday, sliding 9% in midday trading as investor concerns grew over potential changes to federal electric vehicle (EV) tax credits — and a shifting stance by CEO Elon Musk. The stock’s decline follows reports that Musk is now actively opposing the Biden-era EV tax credit framework after initially lobbying to preserve it.
At the center of the market reaction is a new report from Bloomberg suggesting Musk has pivoted his strategy, now aiming to dismantle the $7,500 EV tax credit after failing to sway lawmakers in Tesla’s favor. Musk criticized the proposed budget bill, claiming it “negates all the cost savings supposedly achieved by the DOGE [Tesla’s discount program] at great personal cost and risk,” implying the legislation would harm Tesla’s competitiveness.
While the exact outcome remains uncertain, political winds in Washington signal trouble for the EV credit. Senate Republicans, particularly those from red states with major EV manufacturing hubs, have been reluctant to fully strip the credits. But increasing pressure from House GOP leaders makes it likely that at least some elements of the tax benefit — especially for higher-income buyers — could be rolled back or eliminated.
That spells particular concern for Tesla, which may have more at stake than rivals. Though the $7,500 credit is limited by income thresholds for direct purchases, leased vehicles can still qualify for the full credit without such restrictions. According to Experian, about 50% of all EVs in the U.S. are leased — and Tesla’s numbers are likely even higher. In Q4 of last year, the Tesla Model 3 and Model Y topped the list of most-leased EVs, accounting for 12.2% and 9.1% of all leased electric vehicles, respectively.
