On July 1, 2025, U.S. President Donald Trump escalated tensions with Tesla CEO Elon Musk, threatening to review federal subsidies for Musk’s companies, including Tesla’s electric vehicle (EV) incentives, via the Department of Government Efficiency (DOGE). This follows Musk’s sharp criticism of Trump’s $3.3 trillion tax and spending bill, which eliminates the $7,500 EV tax credit, sparking a public feud that sent Tesla shares down over 6% in premarket trading, reports Reuters.

Subsidy Scrutiny Shakes Tesla’s Outlook

Trump’s Truth Social post claimed Musk’s businesses rely heavily on subsidies, stating, “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 home to South Africa.”

He suggested DOGE, once led by Musk, could save “a FORTUNE” by cutting these funds, including support for Tesla’s EV production and SpaceX’s $22 billion in federal contracts.

Musk fired back on X, declaring, “I am literally saying CUT IT ALL. Now.”

is defiance aligns with his push for fiscal restraint but risks Tesla’s financial stability, as subsidies like the $7,500 tax credit have driven EV affordability. The bill’s removal of this credit, part of Trump’s “One Big Beautiful Bill,” could raise Tesla vehicle prices, potentially dampening demand already strained by a reported sixth consecutive month of sales drops in Sweden and Denmark.

Trump Threatens Tesla Subsidies, Musk Dares To “Cut It All” Amid Ev Tax Credit Clash

EV Industry Faces Regulatory Headwinds

The clash highlights broader challenges for the EV sector. Tesla, a leader in battery-electric vehicles, faces a tougher regulatory path under Trump’s administration. The U.S. Transportation Department, which oversees vehicle design, will decide if Tesla can mass-produce its pedal- and steering-wheel-free robotaxis, currently under testing in Texas. A loss of subsidies could hinder Tesla’s ability to scale this technology, critical to its $406.5 billion valuation, according to the Washington Post.

Analysts warn of economic ripple effects. Stock Trader Network’s Dennis Dick, a Tesla shareholder, reportedly noted:

“Tesla international sales have fallen significantly and if he loses U.S. subsidies, U.S. sales are likely to fall as well.”

With Tesla’s second-quarter delivery report expected to show an 11% year-over-year decline, the subsidy threat compounds operational pressures.

Political Tensions and Industry Implications

Musk’s opposition to the bill, which he called “utterly insane and destructive” on X, stems from its $5 trillion debt ceiling hike and elimination of clean energy incentives.

His threat to form an “America Party” to challenge the “PORKY PIG PARTY” reflects frustration with Washington’s spending but alienates former allies.

Rohan Patel, a former Tesla executive, reportedly criticized Trump’s policies, stating, “MAGA is screwing over American high tech manufacturing and raising electricity prices for everyone with boneheaded energy policies and tariffs.”

For EV owners and enthusiasts, the loss of the $7,500 credit could make vehicles like Tesla’s Model 3, starting at $39,990, less accessible, potentially slowing U.S. EV adoption. With 355,000–386,000 units expected for Tesla’s Q2 deliveries, down 13–20% from last year, the industry braces for a shift. As regulatory and economic uncertainties loom, Tesla’s innovation pipeline and the broader EV market face a pivotal moment.

Call for Fair Subsidy Cuts Across Industries

If the $7,500 EV tax credit is eliminated, many argue it would only be equitable to also remove the substantial tax credits and subsidies supporting the oil and gas industry, which have long benefited from federal incentives. These fossil fuel subsidies, estimated at $20 billion annually in the U.S., include tax breaks for exploration and production, dwarfing EV incentives. Leveling the playing field by cutting all energy subsidies could ensure fair competition, encouraging innovation in both clean and traditional energy sectors without favoring one over the other.

Featured photo courtesy of X