The Biden administration gave new EV buyers in the U.S. a $7,500 tax credit with every purchase of a qualified electric vehicle, while those looking at eligible used EVs will get a $4,000 tax credit. This policy, part of the Inflation Reduction Act (IRA) of 2022, is designed to encourage EV adoption among the general population in the U.S., although some experts say that it’s actually hurting the long-term market penetration of electric cars. Nevertheless, if you’re in the market for a new car but must stick to a budget, the federal EV tax credit could be one of the reasons why you’re even considering an electric car.
Advertisement
However, this might change soon, as there have been rumors that the next administration plans to repeal the EV tax credit. Trump himself has announced several times during his campaign that he will end Biden’s EV mandate, although he didn’t say which policies he planned to can. Now that he’s won the 2024 presidential election, sources familiar with the matter say that President-elect Donald Trump’s transition team is adding this to its legislative agenda to help save for the new administration’s planned tax cut extensions. It’s even said that Republicans in the lower house are set to tackle this tax measure as a priority once it reconvenes next year.
Repealing the EV tax credit could actually give Tesla an advantage
Tesla’s representatives to the Trump transition committee said that the company supports the move. Musk himself said that removing the subsidy would help Tesla. “I guess that there would be some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Elon said last July. “But long term, [it] probably actually helps Tesla.”
Advertisement
Even though Tesla owns about half of the American EV market share in 2024, this wasn’t the case in 2020 when it owned about 80%. Its competitors — Ford, GM, and Hyundai, among others — have been eating into Tesla’s sales, and ending the EV tax credit would probably push consumers looking at EVs away from these manufacturers.
On the other hand, the Alliance for Automotive Innovation, a trade and lobbying group which include industry giants Ford, General Motors, and Stellantis, wrote a letter last month to the U.S. Congress encouraging it to retain the EV tax credit. The group said (PDF) that sustaining the consumer tax credit provision in the IRA is “critical to cementing the U.S. as a global leader in the future of automotive technology and manufacturing” and that it “supports our shared objective of a globally competitive American auto industry that underpins the country’s economic and national security interests.”
Advertisement
While we don’t know yet if and when the tax credit will end, it’s best that you push your EV purchase as soon as possible — whether you’re looking at one of the more expensive EV models or the most affordable electric cars. That way, if the U.S. congress decides to cancel the rebate, you won’t miss out on the up to $7,500. And even if the tax credit doesn’t get repealed, you’d still have a new car for the new year.
