Elon Musk realized too late how badly Tesla will hurt from Trump’s bill

Elon Musk realized too late how badly Tesla would be hurt by Trump’s Big Beautiful Bill, according to former and current Tesla executives who now give more details about the impact on the company.

Tesla’s stock is down 7% today after President Trump signed his ‘Big Beautiful Bill’ (BBB) and CEO Elon Musk announced in response that he will start a new political party.

Musk claims that he has turned against Trump and the Republican Party because his biggest concern is the US federal government’s debt, which they are significantly adding to with this bill.

On the other hand, Trump claims Musk is turning against him because the bill eliminates many subsidies that have greatly benefited Tesla.

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The truth likely lies somewhere in the middle, but now former and current Tesla executives do add some color in the situation by highlighting how Musk woke up too late to how bad this bill is going to affect Tesla.

Financial Times released a new report looking into the likely impact of the BBB on Tesla based on comments from current and former Tesla executives.

The biggest impact is expected to come from the removal of the $7,500 federal tax credit by September 30th, which is expected to reduce demand for electric vehicles in the US significantly. As the biggest EV automaker in the US and with the US being Tesla’s least affected market by its current demand slump, it is expected to hurt the Texas-based automaker more than anyone.

Furthermore, the bill also removes penalties for automakers who fail to meet their emission requirements, which, in turn, eliminates the market for emission credits.

Emission credits are a significant contributor to Tesla’s profits. In fact, Tesla would have lost money in the first quarter without them.

There are similar programs in Europe and China, and Tesla doesn’t disclose how much of its quarterly emission credit revenue comes from the US, but the FT report cites a Tesla executive who claimed that as much as three-quarters of the revenue comes from US credits.

Tesla has contracts with automakers to sell them the credit, which could prevent the total loss of revenue until the end of those contracts, but the exec also warns that some of those contracts include clauses about changes in regulations that could result in termination.

FT cites the exact:

“There will be some level of credit trading until there is certainty . . . [but] the bottom has dropped out of the market long-term. Trump has done it so fast and with such ferocity that the entire programmes might just go away.”

With the demand brought forward into Q3 due to the tax credit expiring by Q4, and the revenue from selling credits to automakers in the US going away, Tesla could find itself losing money in Q4 2025.

A former Tesla executive told FT that Musk seemed to have only recently caught up to this problem:

This is terrible policy and a devastating blow for Tesla’s bottom line. It’s not just Cafe in a vacuum — it’s everything together: tariffs, the $7,500 consumer credit, manufacturing tax credits, charging credits and solar residential credits. […] Elon has finally woken up to this, but talk about a day late and a dollar short.

Furthermore, Tesla faces an increased risk of being further targeted by the federal government, as Trump has made it clear that he is willing to retaliate against Musk as he starts his own party.

Electrek’s Take

I can see that being part of the problem. Elon has been disconnected from Tesla over the last few years, since he purchased Twitter.

I think it’s a real possibility that, as he had Tesla bet everything on autonomy, he didn’t realize that the auto business was sliding and that, now without regulatory credits, Tesla could be losing money.

Sales are crashing in Europe, down in China, and only the US is maintaining – and that’s because Tesla is offering more discounts and incentives than ever.

The BBB is going to be large blow to Tesla and the EV market in general in the US.

Musk can complain as much as he wants but everyone knows that he is greatly responsible for this situation.

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