Tesla’s Sales Spike on the Death of Electric Vehicle Credits

Elon Musk himself has warned Tesla investors that there are “a few rough quarters ahead” for the company, in part because of the federal electric vehicle tax credit that is no longer in place as of yesterday. A Tesla costs $7,500 more today than it did in the third quarter thanks to Trump, and that’s a big reason why Tesla stock is down over four percent as I write this.

The stock market has already priced in an internet-style boom from all this AI capex spending that is propping it and the American economy up. If we don’t get huge productivity and GDP gains out of these centibillions of investment, then the second-most expensive stock market in history is most likely wildly overpriced. This market is driven predominantly by the Magnificent Seven stocks concentrating it to an unprecedented degree, and Tesla is one of them. It is the poster child of over-valued stocks, and so even today when it gets its best news in a long time, people are selling the good news after the smart money bought the rumor that this quarter might be a good one for them, mainly due to people doing what people are very good at doing and procrastinating until the last minute.

“Ford’s chief executive Jim Farley has predicted that EV sales in the US could slow to about 5 per cent of the total market, about half of today’s figure,” wrote the Financial Times. The stock market (theoretically) is a forward-looking indicator, so past results only matter so far as they can be extrapolated into the future, and the sustainability of these sales are clearly in doubt by the market today. Musk himself said the moment we are in will be “challenging” for Tesla, so it’s fair to question whether its third quarter success was just due to people doing what he and the brand itself asked them to do, and “lock in the $7,500 fed tax credit” before it expired.

And Tesla isn’t the only EV automaker having a good day. “Rivian Automotive, the second-biggest EV-only automaker in the U.S., reported a 32 percent increase in third-quarter deliveries to 13,201 while narrowing its full-year guidance,” wrote The Wall Street Journal. “Rivian indicated it expects to deliver about 10,000 EVs in the fourth quarter.”

The third quarter is the end of the U.S. EV boom to a degree, and we can say this because it’s just basic math. I can buy a Model Y for as low as $41,140 right now. With the previous EV tax credit in place, it would cost 18 percent less. Now Teslas and Rivians are more expensive, and Rivian said they expect to sell fewer cars this quarter. This isn’t even economics 101, you could teach this concept to a first-grader.

But unfortunately, a first-grade math education is still a more advanced one than most Tesla bulls exhibit, and this good news from the past is sure to prop the stock up on hopium and annihilate my shorts even more. “Never short a cult” is a phrase every investor has to learn at some point, and Tesla is the master teacher of this lesson. I do believe that when this bubble finally bursts, Tesla will feel it harder than most, and then we will see what its sales look like under the harsh light of reality and without the help of ZIRP-fueled hopium. Tesla had a good quarter, and so did Rivian–but like all of Tesla’s accomplishments, it was built on the back of a government subsidy, and thanks to the president Tesla’s CEO supports, his business still probably has “a few rough quarters ahead” as it leaves one of its best ones behind.