Donald Trump Versus Green Subsidies: New Wrinkle for Elon Musk’s Tesla-SolarCity Plans

  • Date: 18/11/16
  • Cassandra Sweeet, The Wall Street Journal

Shareholders set to vote on Thursday over the merger of Tesla Motors Inc. and SolarCityCorp. have a new dilemma to consider: How Donald Trump’s election will affect subsidies for green power.

The electric-car and rooftop-solar companies controlled by Elon Musk rely on federal clean-energy tax credits and rebates to drive down the costs of what they sell.

Buyers of Tesla cars can obtain a $7,500 federal tax credit for purchasing an all-electric vehicle, for example, while SolarCity customers are eligible for federal tax credits equal to 30% of the price of their solar energy system.

Mr. Trump’s election, combined with Republican control of Congress, is likely to lead to federal policies that favor conventional energy over renewables, some analysts predict.

And current electric-car and solar subsidies are scheduled to decline over time and are unlikely to be renewed or extended under the Trump administration, said Jeffrey Osborne, an analyst at Cowen & Co. “Now, with the potential for the tax credits to go away, [SolarCity has] to accelerate their work on cost reductions and [reaching] grid parity,” Mr. Osborne said.

Mr. Trump has vowed to repeal the Clean Power Plan, the Obama administration’s main climate-change initiative that calls for a 32% reduction in power-plant carbon emissions from 2005 levels by 2030. The plan, which is on hold pending a federal court challenge by some coal companies and states, was widely expected to boost solar and wind power development nationwide.

Under the current federal electric-vehicle subsidy, the $7,500 federal tax credit for buying an electric vehicle is set to drop by half to $3,750 once an auto maker, such as Tesla, sells its 200,000th electric car in the U.S.

Tesla doesn’t release data for its U.S. car sales. But it has delivered 160,000 vehicles world-wide to date, including more than 54,000 this year. Tesla said last May it planned to deliver between 80,000 and 90,000 cars this year.

The reduction of the tax credit is unlikely to damp consumer demand for Tesla’s vehicles, according to the company. [….]

Shares of Tesla closed ​Wednesday at $183.93, off 23% this year. SolarCity shares closed at $19.83, down 61% this year.

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