DOGE’s Scrutiny of Federal EV Loans Raises Concerns for Tesla’s Rivals

Tesla CEO Elon Musk and former Republican presidential primary candidate Vivek Ramaswamy are poised to exert significant influence in Washington as leaders of President-elect Donald Trump’s Department of Government Efficiency (DOGE). While DOGE’s stated mission is to streamline government operations and reduce spending, recent statements from Ramaswamy suggest a sharp focus on the electric vehicle (EV) sector—particularly targeting federal loans extended to Tesla’s competitors under the Inflation Reduction Act (IRA).

DOGE, a newly formed advisory group, is expected to recommend sweeping changes, including reducing the federal workforce by 75% and cutting federal spending by $2 trillion. Achieving these goals would require significant legislative support, especially given that a large portion of federal spending is tied to mandatory programs like Social Security and Medicare.

For EV manufacturers not named Tesla, the more immediate concern lies in Ramaswamy’s pledge to scrutinize federal aid. “DOGE will carefully scrutinize every one of these questionable 11th-hour transactions, starting on Jan. 20,” Ramaswamy wrote on Musk’s platform, X, after the Department of Energy (DOE) announced a $7 billion federal loan to two Stellantis battery plants in Indiana.

Targeting Tesla’s rivals

The DOE’s Indiana loan, projected to create over 6,000 jobs, is just one example of recent federal support under the IRA. Another high-profile commitment involves a $6 billion federal loan to Rivian for its Georgia battery plant, expected to generate 7,500 jobs by 2030. Both projects have been critical to diversifying the EV market and reducing reliance on a single dominant player.

Ramaswamy’s public statements, coupled with Musk’s longstanding criticism of federal subsidies for Tesla’s rivals, suggest a coordinated effort to disrupt this dynamic. Musk has openly supported eliminating the $7,500 federal tax credit for EV ownership, despite Tesla’s reliance on such credits during its early growth phase.

Musk acknowledged during Tesla’s Q2 2024 earnings call that if the IRA tax credits were removed, Tesla was well-positioned to weather such changes. "I think it would be devastating for our competitors, but it would hurt Tesla slightly," Musk said. "Long-term, it probably actually helps Tesla."

“Tesla’s dominant share of the US EV market, once over 70%, has fallen below 50% for the first time,” noted analysts in The Hill. However, Tesla’s fortunes appear to be rebounding. Its stock price has surged nearly 45% since Election Day, with investors speculating that Trump’s policies could favor Musk’s interests.

Implications for EV makers

If DOGE succeeds in rolling back federal support for EV competitors, it could reshape the industry’s competitive landscape. Federal loans and tax credits have been instrumental in allowing newer entrants like Rivian to challenge Tesla’s market dominance. For Tesla, these policy shifts would bolster its competitive edge as the EV sector matures.

For now, the future of federal support for EVs remains uncertain. As DOGE begins its work in January, the industry will watch closely to see how Musk and Ramaswamy’s proposals impact the balance of power among automakers—and whether Tesla’s rebound is a harbinger of things to come.