President Donald Trump‘s ‘Big Beautiful Bill’ recently passed by the Republicans in Congress, could present significant hurdles for Tesla Inc. TSLA, potentially stunting the expansion of electric vehicles and renewable energy in the U.S.
What Happened: The bill, approved on Thursday, abolishes the $7,500 EV Tax Credit, which was a part of former President Joe Biden‘s Inflation Reduction Act, by the end of 2025 for automakers who have sold over 200,000 electric vehicles in the US. This could trigger a demand spike for Tesla vehicles towards the end of 2025, but a significant drop is anticipated in 2026, reported Electrek.
The bill also imposes an annual fee of $250 for electric vehicles by the Federal Highway Administration and $100 for hybrids, ostensibly to fund road repairs. This could raise the annual cost of ownership for Tesla owners, potentially deterring some customers.
The legislation also terminates most clean energy incentives, including the Investment Tax Credit (ITC) for solar and energy storage systems, starting January 1, 2026. This change could negatively impact Tesla’s energy storage division, which is currently its only growing segment.
Despite these challenges, the federal government is unlikely to be able to abolish the California Air Resources Board (CARB) credits, offering a slight reprieve for the Elon Musk-led company.
The 1,000-page package now heads to the Senate for votes.
Why It Matters: The passing of the ‘Big Beautiful Bill’ comes after a series of Republican moves to curtail EV incentives. Earlier in May, House Republicans had proposed to eliminate the federal EV credit program as part of President Donald Trump’s tax cut package. This was followed by the introduction of a bill to eliminate the electric vehicle tax credit and repeal fuel efficiency rules, which could disrupt billions in automaker investments.
These legislative changes could have a significant impact on the EV industry, with Tesla being particularly vulnerable due to its heavy reliance on regulatory credits and its energy storage business. The passing of the ‘Big Beautiful Bill’ could further exacerbate the challenges faced by Tesla and the broader EV industry in the U.S.
While Rivian Automotive Inc. RIVN and Lucid Group Inc. LCID fell 2.63% and 1.88%, respectively in Friday’s pre-market, Tesla was initially rising due to a price target hike by Wedbush analyst Dan Ives. However, it later fell nearly 2%.
According to Benzinga Edge Stock Rankings, Tesla has a growth score of 91.95% and a momentum rating of 92.93%. Click here to see how it compares to other leading EV companies.
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