Tesla (TSLA) stock sank more than 4% in early trading Tuesday, reversing premarket gains on the first trading day since the inauguration of Donald Trump as the president scrapped a pro-EV policy put into place by his predecessor.

Trump on his first day in office wasted no time shedding the skin of the outgoing administration, revoking 78 executive orders made by former Democratic President Joe Biden during his tenure. One of those Biden-era policies that was revoked mandated that half of the new US cars manufactured be electric by 2030.

Other EV stocks fell on the news. Lucid (LCID) tumbled nearly 7% while Rivian slid 5%. Meanwhile General Motors (GM) and Ford (FORD) stocks were up. 

Trump also directed his administration to consider the elimination of what he called “unfair subsidies” and “other ill-conceived government-imposed market distortions that favor EVs.” The Biden administration had issued grants and extended tax credits with funding from the Inflation Reduction Act — much of which went to red states — aimed at bolstering the electric vehicle industry and promoting clean energy to combat climate change. The first EV tax credit was passed under former President George W. Bush.

"[EVs] are a rapidly growing market and relatively new technology, but [loss of the EV tax credit] is not trivial. I mean, $7,500 is not trivial,” Joseph Shapiro, UC Berkeley associate professor of economics, told Yahoo Finance in November.

Tesla CEO Elon Musk has said his company won’t take a hit like other EV makers from the rollbacks.

“I guess that there would be, like, some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Musk said on a call with analysts after Tesla’s second quarter earnings report. “But long term probably actually helps Tesla, would be my guess, yes…the value of Tesla overwhelmingly is autonomy.”

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Despite Tuesday's decline, Tesla shares have soared recently as part of the so-called Trump trade (which also includes crypto-linked stocks, for example). Tuesday’s gain puts the stock up nearly 73% since Trump’s election victory in November.

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

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