Tesla CEO Elon Musk
“Get rid of all the credits”
A strategy to eliminate competitors by accepting losses?
Tesla CEO Elon Musk again stirred controversy on December 5, suggesting that the $7,500 electric vehicle tax credit should be eliminated. During a meeting with Senate Majority Leader-elect John Thune on Capitol Hill, Musk was asked about the tax credit, and he boldly responded, “Get rid of all the credits,” adding, “I think we just need to make sure we spend the public’s money well.” This is not the first time Musk has expressed such views; in July, he argued for eliminating all subsidies, noting that while it would hurt Tesla slightly, it would have a much more devastating impact on competitors.
Trump’s right-hand man: Musk’s bid for market dominance
According to Reuters, President-elect Donald Trump is expected to repeal the electric vehicle tax credit under the Inflation Reduction Act (IRA) passed by President Joe Biden. On the surface, it is clear that Tesla, which accounted for 48.2% of electric vehicle sales in the US in the third quarter of this year, will suffer the most enormous losses.
However, analysts suggest that Musk’s push to eliminate the subsidy is part of a larger strategy to consolidate Tesla’s dominance in the electric vehicle market. According to Dan Ives, an analyst at Wedbush Securities, removing the subsidy would further increase the financial pressures on Tesla’s competitors like Ford and General Motors, making Tesla’s market share even stronger, given that Tesla is the only automaker turning a profit on electric vehicle sales.
Tesla’s diversified portfolio: Beyond electric vehicles
The background to the claim is that Tesla is a company expected to generate sales in various fields, such as artificial intelligence (AI), robots, energy storage systems (ESS), and electric vehicles. In a report on its visit to the Texas Gigafactory that day, Bank of America (BoA) predicted that Tesla’s robot business would be very positive.
BoA raised its target price from $350 to $400, citing Tesla’s plan to deploy 1,000 of its Optimus robots at the Gigafactory by the end of next year. Wedbush predicted that Tesla’s market cap could increase by $1 trillion from AI and autonomous driving technologies, excluding robotaxis.
Battling Chinese competition: Securing the US market?
Some analysts suggest that Musk’s stance on subsidies also responds to increasing competition from Chinese automakers such as BYD. As Chinese companies like BYD and Xpeng continue to expand aggressively in global markets with substantial government backing, Tesla’s position is being challenged. According to market research firm SNE Research, BYD topped global electric vehicle sales from January to October 2023, selling 3.107 million units, a 36.5% year-on-year growth. Meanwhile, Tesla’s sales dropped slightly, with 1.425 million units sold, a 1.1% decrease compared to the previous year, reducing its market share from 13.1% to 10.5%. This competition, particularly from Chinese automakers, has led to predictions that Tesla may struggle to surpass last year’s sales total of 1.81 million units.
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