Tesla could lose more than half its earnings before interest and taxes (EBIT) if proposed policy changes backed by Donald Trump become law. That is the conclusion of JPMorgan analyst Ryan Brinkman, who issued a client note detailing potential financial consequences for the electric vehicle maker.
Brinkman’s report, cited by CleanTechnica and TheStreet, states that Tesla could face a 52% EBIT decline under the “One Big Beautiful Bill Act,” a legislative proposal that would reverse parts of the Inflation Reduction Act.
Two key provisions with multibillion-dollar impact
Brinkman attributes approximately 19% of the projected EBIT hit to the proposed elimination of the $7,500 federal electric vehicle tax credit. This credit is currently available to eligible consumers under Section 30D of the Internal Revenue Code. Brinkman estimates that Tesla would lose $1.2 billion annually if the credit were repealed, CleanTechnica reported.
The remaining 33%, or approximately $2 billion in annual EBIT, stems from proposed changes to California’s Zero Emission Vehicle (ZEV) credit program. Tesla has historically generated significant revenue by selling these credits to automakers that do not meet state clean air standards. Tesla’s latest quarterly report, filed with the Securities and Exchange Commission, confirms that regulatory credit sales remain a substantial source of income.
Profitability depends on policy incentives
According to Tesla’s first-quarter 2025 earnings filing, the company would have reported a loss without revenue from regulatory credits. These credits accounted for $442 million in Q1 alone. The company has acknowledged Tesla’s dependence on government-backed programs in multiple investor filings.
Brinkman’s note argues that removing these revenue streams would leave Tesla with limited room to protect margins or sustain growth. Cutting vehicle prices to offset lost incentives could harm profitability, while maintaining current prices might reduce demand in a more competitive market.
Muted investor reaction so far
Brinkman also expressed concern that the potential impact of the proposed legislation is not being adequately priced into Tesla’s stock. He wrote that investors appear “completely oblivious” to the risks, despite the company’s reliance on credits and tax breaks for profitability (TheStreet, Jan. 12, 2025).
Tesla’s stock recovered in early 2025 after CEO Elon Musk announced he would step back from his position at the Department of Government Efficiency. However, analysts note that the market response has focused more on Musk’s role than on pending legislation.
Musk breaks with Trump on fiscal grounds
Although Elon Musk has not publicly addressed the earnings risks to Tesla, he has criticized the “One Big Beautiful Bill Act” on other grounds. In a post to X dated May 29, 2025, Musk said the legislation would worsen the federal deficit and undermine efforts by the Department of Government Efficiency, where he had previously served as an adviser. He also questioned how the bill could be both “big” and “beautiful,” referencing Trump’s branding of the proposal.
This criticism marks a shift in tone from Musk, who has at times aligned himself with Trump administration goals in the past. While Musk’s disapproval does not explicitly reference Tesla’s financial exposure, it suggests broader concern with the bill’s direction.
Tesla’s limited room to maneuver
Analysts note that Tesla has built much of its business model around existing incentive structures. Sudden changes in tax and regulatory frameworks could force the company to accelerate new initiatives or make difficult cost-cutting decisions.
Brinkman highlighted Tesla’s upcoming robotaxi project in Austin as a potential revenue stream that could operate outside government subsidy structures. He also suggested that investors monitor Tesla’s regulatory credit disclosures and pricing strategy for signs that the company is preparing for policy shifts.
The legislative path forward
The “One Big Beautiful Bill Act” has not yet passed, and its provisions could change during the legislative process. Analysts say that amendments preserving some level of EV or ZEV incentive could significantly reduce the potential financial damage to Tesla.
Brinkman’s analysis presents a stark view of the company’s exposure to political risk. Whether the full 52% EBIT hit becomes reality will depend on how the legislation evolves and how quickly Tesla can adapt to a new financial landscape with fewer government incentives.
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