Representatives Mike Levin (D-Calif.) and Sean Casten (D-Ill.) introduced the Cheap Energy Act to restore the $7,500 federal EV tax credit for new vehicles, a credit that expired last year. The bill has garnered support from at least 160 House Democrats.
The math is brutal for Tesla bulls. Ford Motor (NYSE: F) and General Motors (NYSE: GM) have struggled to achieve profitability on EVs and desperately need the credit to compete on price. Tesla, already profitable on vehicles and offering some of the lowest starting costs in the market, would see minimal benefit. Worse, the credit would narrow Tesla's competitive moat by making Ford and GM offerings cheaper to consumers.
Tesla CEO Elon Musk has previously stated the tax credit's absence helped Tesla more than its presence—and he is now backing the Republican Party. Any legislation would require President Donald Trump's signature. A presidential veto would require a two-thirds majority in both chambers to override, a threshold Democrats cannot reach alone.
This creates a clear conflict. Musk's political bet could preserve Tesla's advantage by blocking a policy that would disproportionately benefit rivals. But the calculus is treacherous: if the credit passes despite Republican opposition, Ford and GM valuations could spike while Tesla's relative position weakens. If it fails, Musk gets his way, but the broader EV sector stalls.
Investors holding Ford and GM should monitor the bill's progress closely. A Democratic congressional majority paired with Trump vetoing the bill would represent maximum downside for legacy automakers. Conversely, any pathway to passage—either through Republican defections or a 2026 legislative window—is a material catalyst for Ford and GM equity.
