Elon Musk’s Tesla faces the loss of billions of dollars in government subsidies, following his explosive fallout with Donald Trump, after the president cut state support for green industries.
Subsidies have been central to Tesla’s rise from upstart manufacturer to the world’s largest electric vehicle (EV) producer in less than 20 years. But analysis by Sky News’ Data & Forensics team reveals the president’s cuts could leave a significant gap in its future earnings, raising questions about its business model and market valuation.
Revenue from state subsidies accounted for at least 38% of Tesla’s profits of $7.1bn in 2024 as the company banked $2.8bn from trading “regulatory credits”, a state-level subsidy paid to encourage production of electric vehicles.
Meanwhile, accounts for the first quarter of this year show Tesla earned $595m from regulatory credits – almost 50% more than its net earnings of $409m – suggesting that without the subsidy Tesla would be operating in the red.
Tesla’s total revenues in 2024 were $98bn, of which automotive sales made up $72bn.
Tesla has also benefited from a federal tax credit of $7,500 available to consumers buying any electric car. If applied to all of the more than 630,000 Tesla cars sold in the US last year, it would have been worth $4.7bn in discounts.
The federal tax credit was axed in Mr Trump’s flagship tax and spending bill, while California’s powers to issue credits as part of zero-emission vehicle schemes were revoked last month, threatening state-level schemes across the country.
Amid the public fallout between Mr Trump and the man who helped bankroll his election campaign, the president renewed his efforts to cut green industry subsidies.
In a Truth Social post, Mr Trump said: “Elon may get more subsidy than any human being in history, by far, and, without subsidies, Elon would probably have to close up shop and head back to South Africa.”
Speaking to reporters on the White House lawn, where previously he had posed with Mr Musk alongside a selection of Tesla models, the president added: “Elon hates that the electric vehicle mandate is going to be terminated.”
Tesla’s worldwide sales have also declined in the face of increased competition and consumer unease about Mr Musk’s previous support for the president.
“Elon’s playing a very dangerous game”
Gordon Johnson, an investment analyst and prominent Tesla sceptic, told Sky News: “The changes that Trump is proposing have significant implications – negative implications – for Tesla’s fundamentals.
“If all of these government programmes were taken away, Tesla would go into losing money and burning cash and the stock would implode.”
Ross Gerber became one of Tesla’s earliest investors after having what he calls “an amazing epiphany” when he saw the Tesla Model S for the first time. “I thought: ‘Wow, this could actually change the way we travel,'” he said.
Now he is selling his Tesla stock and considering offloading his Tesla Cybertruck because of the hostility it attracts. “Elon’s playing a very dangerous game,” he added.
