During the first half of 2025, the stock market was heavily influenced by new tariff policies introduced by the Trump administration. Now, a week into the second half of the year, President Donald Trump hasn't stopped introducing legislation that will further sway the direction of the capital markets.
On July 4, Trump signed the "big, beautiful bill" into law. Like many pieces of legislation, the bill covers a variety of topics. But for this article specifically, I'm going to point out one particular section of the bill that I think could benefit Tesla (TSLA +3.93%).
Let's explore how the megabill could shake things up in the electric vehicle (EV) market and why Tesla could be a winner right now.
NASDAQ: TSLA
Key Data Points
How does the bill impact Tesla?
Over the last several years, many businesses have made a cognizant effort to invest in sustainability and green energy solutions. This is more formally known as environmental, social, and corporate governance (ESG). One reason corporations have explored ESG in recent years is because some of these initiatives are eligible for tax credits.
ESG does not solely benefit corporations, though. Consumers also have the opportunity to benefit from green energy tax subsidies. For example, President Joe Biden's Inflation Reduction Act (IRA) included tax incentives in order to spur demand for EVs over traditional combustion engine vehicles.
However, Trump's "big, beautiful bill" seeks to roll back some of these incentives. More specifically, EV tax credits are expected to be phased out by September.
As the graph above illustrates, Tesla stock has not reacted well to the bill being passed. Shares took an initial nosedive in late June, as rumors swirled on Capitol Hill regarding the likelihood of the bill being passed. Following the bill being signed into law in early July, shares of Tesla sold off even further.
Image source: Getty Images.
The removal of EV subsidies could be a hidden catalyst for Tesla (for now)
The perception of EV subsidies going away might seem like an unwanted headwind for Tesla's business. But as a contrarian, I think there is more to the picture. In fact, I see Tesla benefiting from the removal of these EV tax credits.
The table below breaks down Tesla's production and delivery stats around its EVs, as well as revenue growth figures for the EV business over the last six quarters.
| Category | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 |
|---|---|---|---|---|---|---|
| Production | 433,371 | 410,831 | 469,796 | 459,445 | 362,615 | 410,244 |
| Deliveries | 386,810 | 443,956 | 462,890 | 495,570 | 336,681 | 384,122 |
| Automotive revenue (YOY growth) | (13%) | (7%) | 2% | (8%) | (20%) | Not Yet Reported |
Data source: Tesla. YOY = year over year.
For more than a year now, Tesla's production and delivery growth has been decelerating. As the EV revenue growth trends make clear, Tesla's largest source of sales has been decimated -- taking a toll on the company's overall profit margin.
US Inflation Rate data by YCharts
In my view, these uninspiring figures could suggest that consumers have been hesitant to purchase an EV for quite some time now. Even with the tax subsidies, EVs are still quite expensive. And with consumers potentially worried about inflation, transitioning to an EV has largely been seen as more of a luxury than a necessity for most consumers.
However, with inflation improving and the phaseout of some ESG tax credits right around the corner, I think some consumer demographics may choose to finally purchase an EV in the coming months.
For Tesla, the phaseout of EV tax credits could actually provide some much-needed demand tailwinds as consumers who were on the fence about buying an EV don't have much time left to take advantage of the subsidies.
Is Tesla stock a buy right now?
Given how much Tesla stock has sold off and the potential for the bill's removal of EV tax credits actually working in favor for the company, it might seem like now is a good time to buy the dip. Smart investors know there is more to the picture, though.
Right now, Tesla stock is heavily influenced by several factors -- the "big, beautiful bill" being just one of them. In addition to Trump's new policies, Tesla stock is also moving based on narratives around the company's robotaxi launch last month, as well as news related to CEO Elon Musk's new political party formation.
At the end of the day, Tesla may surprise investors with better-than-expected results during the second half of the year. However, my idea suggesting that the removal of EV tax credits could lead to demand for Tesla vehicles is a near-term catalyst. As far as the long-term picture is concerned, Tesla's EV growth remains cloudy.
For these reasons, I would sit on the sidelines right now and continue monitoring Tesla's growth in order to get a better picture of the company's long-run trajectory.
