Musk is short-circuiting the EV revolution he helped spark

By Liam Denning / Bloomberg Opinion

There’s a crazy idea going around, fueled by one Elon Musk, that Tesla Inc., an electric vehicle maker, would be unscathed if Republicans ditch the federal tax credit for electric vehicles.

There is a certain superficial logic at work. Tesla is a profitable EV maker years ahead of the competition in designing and selling vehicles powered by batteries. Old automakers like General Motors Co. and Ford Motor Co., meanwhile, are playing catch-up and losing money on EVs. Were tax credits for EV buyers withdrawn, Detroit automakers’ losses would deepen, in part because they need to expand sales to cover the investments in plant and equipment already made and the price shock would drive customers away. Tesla would also suffer a bit, but its higher margins offer insulation and, in any case, it’s about to conquer the worlds of autonomous driving and artificial intelligence.

Bits of this are true. Detroit would suffer. Tesla’s valuation does mostly reflect dreams of robotaxi and AI dominance. But here are two counterpoints: Detroit mostly sells vehicles with internal combustion engines and Tesla’s core autos division only sells battery EVs.

The tailwinds behind EV adoption under the administration of President Joe Biden may have obscured the fact that internal combustion engines still dominate the U.S. market. Battery EVs and plug-in hybrids constitute just 10 percent of sales and the price war of the past two years is testament to the slowdown in growth despite help from Biden’s green legislation, such as those credits in the Inflation Reduction Act. EVs compete with each other, sure, but in a country famously in love with big, hard-to-electrify vehicles, they mostly compete with gas guzzlers.

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