Tesla’s Fate in the Balance: Trump’s Policies Spur GM, Ford EV Retreat

General Motors’ announcement on Tuesday, projecting a $1.6 billion charge related to its electric vehicle (EV) investments in its upcoming quarterly results, underscores a growing unease among legacy automakers regarding their EV strategies. This revelation follows similar cautionary statements from key players in the industry.

Ford CEO Jim Farley indicated late last month that the sunsetting of federal tax credits would likely halve the demand for fully electric vehicles. Earlier, Stellantis, the automotive conglomerate encompassing brands like Chrysler and Jeep, scrapped its ambitious target of exclusively producing EVs in Europe by 2030, significantly scaling back similar objectives within the U.S. market, particularly for the Chrysler brand.

These headwinds are further intensified by the elimination of the $7,500 federal tax credit for EV purchases, a hallmark policy shift under President Trump’s recent spending legislation. This policy reversal adds another layer of complexity to an industry already grappling with a rapidly evolving market landscape.

Amidst this industry-wide recalibration, Tesla remains a central, if somewhat silent, figure.

Elon Musk’s company continues to lead the U.S. EV market in sales volume. However, competition has eroded market share resulting in a decline in brand value. Data from Motor Intelligence indicates Tesla held approximately 43.1% of the all-electric market in the U.S. at the close of September, a drop from 49% at the end of the prior year.

As Tesla prepares to release its third-quarter results next week, analysts will be scrutinizing the company’s demand forecasts in the post-tax credit environment. The recent unveiling of more accessible, lower-priced iterations of the Model Y SUV and Model 3 sedan by Tesla can be seen as an attempt to navigate the pricing sensitivities introduced by the incentive’s removal.

Steve Greenfield, general partner at Automotive Ventures, suggests that the retrenchment of traditional automakers from the EV sector could indirectly benefit Tesla, potentially bolstering its market share. Greenfield, in emailed comments, highlighted the company’s “very strong brand loyalty” as a key asset.

“Chances are, most Tesla buyers will continue to stay in the brand, as they buy their next new car,” Greenfield stated.

However, Greenfield also cautioned that broader challenges persist. He anticipates a “dramatic shrinkage” in demand for battery electric vehicles during the fourth quarter, driven by the earlier “pull-ahead of demand” as consumers accelerated EV purchases ahead of the tax credit expiration. Greenfield foresees Tesla potentially facing a ‘double whammy’ scenario toward the end of the year, marked by reduced BEV sales volume together with compressed profit margins on those cars eventually sold.

Tesla has not released a comment regarding this situation.

Investor sentiment towards Tesla reflects a nuanced perspective. After a steep 36% decline in the first quarter, the stock has recovered significantly, gaining more than 7% year-to-date. Aiding this resurgence was Musk’s purchase of approximately $1 billion worth of Tesla stock in September, signaling confidence to the investment community.

The shaky beginning to the year was related to a wave of consumer resistance across the U.S. and Europe, connected to Musk’s more provocative public statements and political alliances.

Ahead of the company’s third-quarter earnings report scheduled for next Wednesday, analysts anticipate revenue growth of approximately 3.5% year-over-year, reaching $26.1 billion, according to LSEG data. However, forecasts suggest a potential revenue decline in the fourth quarter, with a projected 3.5% drop for the whole of 2025, which would represent the firm’s first full-year dip in revenue.

Earlier in the month, Tesla announced a 7% year-over-year increase in quarterly vehicle deliveries for the third quarter, signaling a potential recovery following two consecutive quarters of contractions.

“It’s not just a retreat of everybody else, and Tesla gets to run away with the market,” remarked Mark Wakefield, global automotive market lead for Alix Partners.

Wakefield notes, consumer demand for fully electric vehicles had “already kind of flatlined a bit” preceding the Trump administration’s legislative changes. Auto purchasers are demanding a “breakthrough moment” where EVs will actually become as or more cost effective compared to their traditional counterparts.

Wakefield observed what he calls a “need for newness” adding that Tesla’s slightly cheaper Model Y/3 EVs aren’t exactly earth shattering.

The Trump administration’s wider policy decisions are adding to the challenges.

Robbie Orvis, a senior director at Energy Innovation, a nonpartisan climate policy think tank, stated to CNBC that the automaker’s writedowns were widely expected and stem almost entirely from policy alterations, rather than merely concerning the tax breaks.

Orvis cites, the Trump White House has “revoked California’s waiver to set its own vehicle standards, revoked billions in funding for EV chargers in concert with auto plants prepared to retool building EVs. It continues to undo vehicle tailpipe standards to encourage EV adoption.”

He claims that these policies and tariffs have already contributed billions of dollars in losses for individual U.S. automakers.

Tesla in experiencing a similar set of pains and is reflected within international markets.

“Chinese automakers are rapidly displacing U.S. automakers in foreign markets as they are able to offer cheaper, higher-quality new cars, particularly EVs, in markets where there is large and growing demand for these cars,” Orvis added.

Meanwhile, Musk is actively diverting investment focus toward other areas.

He emphasizes that the current future of the entire organization hinges on autonomous robotaxis and humanoid robotics; two very new markets that are yet to achieve viability. Tesla is working on Tesla Robotaxi limited services within specific cities, but is far behind Alphabet’s Waymo.

Musk stated in March that Tesla expects to produce 5,000 Optimus robots during the year, a plan thrown in question to due the departure of major key personnel.

In September, Musk tweeted that “~80% of Tesla’s value will be Optimus” Last year he predicted Optimus could eventually turn into a $25 Trillion company equal to more than half the total valuation of the S&P 500 index at the time.

While a promising story for many Tesla fanboys, the company still relied on sales and revenue of EVs to drive its business. In the U.S., and perhaps in the near future, Tesla’s market share is poised to increase, as the market pie is likely to shrink.

— CNBC’s Mike Wayland contributed to this report