Tesla Inc. (TSLA) shares climbed 1.61% in after-hours trading Wednesday after President Trump announced that his tax legislation includes deductions on interest for EV purchases. Speaking at the U.S.-Saudi investment forum, Trump told attendees that middle-income Americans could catch a break on their Tesla loans, then turned his attention to the company's CEO with a pointed remark: "You're so lucky I'm with you, Elon."

How The Deduction Actually Works

Trump emphasized that "middle-income people" weren't fully aware of the tax benefit. "We're giving them a deduction on the interest if they buy a nice Tesla car," he explained. But here's the catch—it's not just about Tesla. The deduction applies to all electric vehicles, which Trump called an "unbelievable boon for car sales."

The president also mentioned a supposed "mandate" requiring everyone in the U.S. to own an electric car by 2030, but quickly added that even Musk thought that idea was "ridiculous."

Breaking Down The Big, Beautiful Bill Provisions

The deduction is tucked into Trump's Big, Beautiful Bill Act, and the details matter. Taxpayers can deduct up to $10,000 annually in interest on vehicle loans through 2028, but only if the vehicle had final assembly in the United States.

Income limits apply: singles earning up to $100,000 annually and couples making up to $200,000 annually qualify for the full deduction. Once you cross that threshold, the deduction phases out at a rate of $200 for every $1,000 above the limit. So if you're making significantly more than the cap, the benefit diminishes quickly.

Musk Responds With Gratitude

Elon Musk took to X on Wednesday to thank Trump for everything "he has done" for the U.S. and the world. The post came shortly after Trump's forum remarks, though Musk didn't elaborate further on the tax deduction specifics.

The Broader EV Policy Picture

This deduction announcement comes against a backdrop of decidedly pro-gasoline policy moves from the Trump administration. The $7,500 Federal EV Credit that applied to all electric vehicle purchases ends on September 30 this year. That's a significant shift from the previous incentive structure.

The administration also relaxed Corporate Average Fuel Economy (CAFE) standards, effectively removing legal pressure on automakers to meet strict emissions targets and eliminating the need to purchase zero-emission vehicle credits.

Automakers Pump The Brakes On Electric Plans

Traditional automakers are reading the room and adjusting accordingly. Ford Motor Co. (F) and General Motors Co. (GM) have both scaled back their electric vehicle ambitions. Ford CEO Jim Farley predicted that EV adoption in the U.S. would plateau around 5%, and reports suggest the company is pulling the plug on F-150 Lightning EV production.

General Motors signaled that demand for EVs has fallen significantly following the Trump administration's policy changes. The company recently announced a $1.6 billion charge related to its electric vehicle operations, underscoring the financial impact of shifting market dynamics.

Tesla's Global Sales Struggle

Meanwhile, Tesla itself is facing headwinds. The automaker's sales dropped 36% year-over-year in October, with only 26,000 units sold in the country. Even Tesla's Shanghai Gigafactory, typically a strong performer, saw sales of the Model Y SUV and Model 3 sedan (including exports) decline 9.9% from last year to 61,497 units in October.

So here's the irony: Trump introduces a tax deduction specifically designed to boost EV sales at a moment when Tesla's numbers are heading in the wrong direction and major automakers are retreating from the electric market. Whether a $10,000 interest deduction can reverse those trends remains to be seen.

Price Action

TSLA closed regular trading up 0.68% at $403.99, then surged an additional 1.61% to $410.50 in after-hours trading following Trump's announcement.