EVs, the End of Subsidies, and Harsh Realities of the Market

Some of the most popular and talked-about stocks on the market are about to get a reality check as Congress pushes through major changes to the renewable energy and electric vehicle subsidies implemented over the last decade. As part of the “Big, Beautiful, Bill”:

• The $7,500 EV tax credit could disappear in 2026

• The $4,000 used EV tax credit is likely gone

• The 30% investment tax credit for solar and energy storage may be ended

• A new $250 tax for EV owners and $100 for all hybrid vehicle owners is included in the bill that passed the House of Representatives

• Congress is trying to eliminate states’ ability to have their own fuel standards or regulatory credit schemes

  • California is the de facto regulator for many products because of its size, and that extends to EVs as well, with regulatory credits like ZEV credits

I don’t like to get into politics, and we don’t know what the final bill will look like, but this is a huge deal for companies like Tesla $TSLA ( ▲ 6.94% ) , Rivian $RIVN ( ▼ 1.66% ) , Sunrun $RUN ( ▲ 4.51% ) , NextEra Energy $NEE ( ▲ 0.41% ) , and many more. Billions of dollars of investment could be rendered uneconomical, and the market is simultaneously reacting with a vengeance and being lackadaisical. I’ll explain how this affects some of these companies below.

As for the market overall, the stock market fell into the red for the year last week as bond yields rose and investors questioned whether the combination of tariffs and higher deficits would lead to interest rates being higher for longer, even if there’s a recession.

As for the Asymmetric Portfolio, it was down for the week, but holding incredible gains compared to the market.

In Case You Missed It

Here’s some of the content I put out this week.

• Risk, Safety, and the Lies We Tell Ourselves: A lot of investors think they can quantify risk in the market, but it’s all smoke and mirrors.

• Google vs OpenAI + Jony Ive: OpenAI is buying Jony Ive’s startup for $6.5 billion to make…something? Meanwhile, Google keeps introducing the best models and is the talk of AI today.

• Crypto, the Blockchain, and Going Mainstream: Don’t look now, but companies like SoFi $SOFI ( ▲ 2.29% ) and Robinhood $HOOD ( ▲ 4.51% ) are joining Coinbase $COIN ( ▲ 1.23% ) in the blockchain business.

The Devastation Coming For EVs and Renewables

I’ve been following the renewable energy industry since 2009, when I was charting the rapid cost reduction of solar panels for a fund I interned at in grad school.

I always thought it was a classic example of disruption from lower-cost, less efficient technology that would eventually overwhelm fossil fuels.

Overall, I got the trend of the market right. The problem was, very few companies survived the ups and downs of subsidy changes around the world, Chinese manufacturing competition, and the volatility of interest rates.

But solar, wind, and energy storage currently dominate new electricity generation in the U.S. because it’s the lowest-cost option (helped by tax subsidies). EVs have grown similarly (helped by subsidies).

Today, we may be seeing the biggest change in domestic energy policy of the last decade. The direct and indirect subsidies that drove domestic production of solar panels, renewable energy power plants, and EVs over the last decade could be gone in months.

The last time this happened, revenue and earnings dropped for companies involved, and those without a sustainable business went bankrupt. We may see the same this time around.

Dependence on Subsidies

I’m an advocate for renewable energy broadly, but we need to be honest about the impact subsidies have had on the industry.

The $7,500 tax credit has helped make buying an EV economical for buyers. But make no mistake, EVs are just as price and competition-sensitive as any other segment of the auto market in 2025. You can see that Tesla has had to lower prices by a whopping $15,847 since the middle of 2022, and even then, their demand is down.

Would the elimination of the $7,500 tax credit take another $7,500 bite out of revenue? Probably.

Regulatory credits have also helped Tesla remain profitable while net income has plunged in this time. Without regulatory credits, Tesla wouldn’t have made money in Q1 2025, so the writing is on the wall.

I’m picking on Tesla here because it’s the biggest EV maker, but the same can be said for Rivian. Rivian doesn’t have enough demand for R1 vehicles to run its Normal, Illinois facility at full steam, so it’s bringing the R2 there while building out a Georgia plant that won’t be ready until the end of the decade…IF Rivian gets a $6.6 billion loan from the U.S. government.

At the same time, its balance sheet is a mess even before the $6.6 billion loan.

Lucid is in an even worse spot, with very little revenue and cash drying up quickly.

Fundamentals, Policies, and Valuations Matters

I’ve watched the solar industry grow to be the largest source of new generation in the U.S. while investors (for the most part) lost money. And now, subsidies that made a few companies economical are potentially drying up. Solar investors, who have seen this show before, are running for the exits.

The industry will survive because solar, wind, and energy storage is the lowest cost option for most energy production today. But that doesn’t mean investors will make money.

On the same token, EVs are likely the future of vehicles, but that doesn’t mean competitive dynamics and the subisides involved in the industry aren’t important to their businesses. And the market doesn’t seem to care at the moment.

But eventually these policy changes would be reflected on the bottom line. And I don’t think every company will survive, especially with the debt they’ve piled on. Mix in higher interest rates and a weakening economy and you could have a repeat of the disasters we saw in solar and wind in the 2010s make their way to EVs.

Business strategy matters.

Public policy matters.

Valuation matters.

When you’re fighting uphill will all three, it’s a recipe for disaster as an investor. And I’m worried about EV stocks in 2025.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please do your research before acquiring stocks.