There is a lot of uncertainty surrounding Tesla Motors Inc (NSDQ:TSLA) today.
Tesla is undoubtedly very dependent on ZEV credit sales.Q1 $15 million adjusted profit included $68 million ZEV credit sales Q2 $26 million adjusted profit included $51 million ZEV credit sales.The company however does not have to worry about any impact from a Trump Administration for ZEV credit sales. The ZEV program is administered and governed by California not the federal government. There is likely no policy change the Trump Administration can do to impact the ZEV program. The second government policy source of revenue for Tesla Motors is the federal electric vehicle tax credit. Buyers of a plug-in or electric vehicle are eligible for a $7,500 federal tax credit until that automaker has sold its 200,000th plug-in in the US. After an automaker has reached 200,000, the credit is partially phased out until a complete phase ~12 months later. Based on historical Tesla sales, the company will not hit its 200,000 limit until Q3 2018 (assuming Model 3 production stays on track). After that buyers of a Tesla vehicle will receive only a partial credit followed by no credit a year later. The federal tax credit can be changed by a the Trump Administration. The credit can be abolished immediately or become more stringent. This is a large risk to Tesla since the Model 3 is targeted more towards middle income households versus the higher end Model S, Falcon and Roadster. An immediate cessation or reduction of this credit may lead to depressed Model 3 sales.