Even if incentives go out the window, we should expect Tesla to keep chugging along just fine.
Trump’s presidency has sparked a conundrum within the auto industry, which keeps asking itself one major question: what will Trump’s policies do for the auto industry? Many can speculate, and we did based on some of the policies Trump had announced he would implement, but the reality is that nothing is clear. One thing investors were certain of is that Trump’s policies would have a negative effect on green car manufacturers like Tesla, but as Bloomberg reports, that may not be the case.
It all boils down to Zero Emissions Vehicle credits, called ZEVs and enacted by the California Air Resources Board. California and nine other states currently adhere to this law, which penalizes automakers who don’t build enough (or any) electric vehicles. The incentive to build EVs is that an automaker would receive ZEV credits for each EV it makes, which it could then sell to automakers short on ZEV credits to avoid a fine. As an automaker that sells pure electric cars, Tesla benefitted from this system to the tune of $139 million in the third quarter alone. However when Trump and his cabinet make it to the White House, that may change. One of the president-elect’s campaign promises was that he would convince California to dismantle the ZEV initiative.
Even so, Tesla CEO Elon Musk claims that his company wouldn’t be seriously impacted if that were to happen. Musk has been a proponent for giving the ZEV program some teeth since an overabundance of credits in the market means that Tesla has a hard time breaking even. It’s the ZEV program’s declawed nature that insulates Tesla from the repercussions if the program were to be scrapped. Still, even if Tesla isn’t fully dependent on these credits for survival, there’s no denying that it at least provides the automaker with some extra cash, something it needs as it begins to scale its factories and operations to the size needed in order to successfully manufacturer the Model 3.