TSLA Tesla Inc

By Adrienne Roberts 

Shares of domestic auto makers largely suffered after news the House Republican tax plan would kill the electric-vehicle tax credit, a trend that further hits an already beleaguered Tesla Inc.

Eliminating the $7,500 federal EV incentive would likely crimp sales of battery-powered cars at a time when such vehicles cost far more than conventional cars to produce. Tesla, which sells only electric vehicles, fell slightly to $298.30 in midday trading on the Nasdaq.

General Motors Co. and Ford Motor Co. also posted modest declines, with the pair trading at $42.38 and $12.37 respectively. Neither company relies heavily on electric cars for overall sales, but both have signaled plans to substantially increase battery-powered offerings in coming years.

Tesla, GM and Ford declined even as the broader stock market gained steam. Fiat Chrysler Automobiles NV -- an auto maker far less bullish on electrics, gained steam in midday trading.

Negative investor reaction hits Tesla particularly hard, with the stock's current lows nearing price levels not seen since May. The company was already under severe pressure following the report of its worst quarterly financial losses earlier this week. Shares are off 8% from Wednesday's open.

Tesla has also faced heat due to hiccups related to production of its new Model 3 sedan, an affordable electric vehicle aimed at the broader mass market. Tesla made just 250 Model 3 cars during the third quarter, missing its projection of more than 1,500.

In a research note, Evercore said that while the absence of the $7,500 tax credit isn't a "make or break for the majority of Tesla's potential customers...the absence of the credit is likely to lead to some people altering their purchase decision."

Evercore noted Tesla isn't the only auto maker that would be affected by the elimination of the tax credit, and the change in legislation could be more harmful to GM, Nissan Motor Co. and other auto makers with mass-market electric vehicles that have launched or have committed to produce.

"We believe price (as well as unappealing product, though the two are interlinked) is the main inhibitor for electric vehicle sales over the next three to five years," Evercore said.

In a statement issued Thursday, GM said "tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles," and it intends to work with congressional leaders to maintain the incentive. Tesla didn't immediately comment.

Tesla had been vying for the No. 1 spot among U.S. auto makers in terms of market valuation during the summer months, but has since fallen far behind GM, which is valued at $61.5 billion. Tesla, currently valued at $49.9 billion, is now virtually even with Ford.

Electric vehicles are already a tough sell to U.S. consumers because gas prices are low, and the tax credit was seen as a way to lure customers to buy electric or plug-in hybrid vehicles that are more expensive than their gasoline-powered counterparts. Electric cars aren't seen being cost-competitive with conventional cars until the middle of the next decade, according to analysts.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com

(END) Dow Jones Newswires

November 03, 2017 14:21 ET (18:21 GMT)

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