- President-elect Donald Trump's transition team is putting the wheels in motion to delete the $7,500 tax credit for EVs.
- The credit has been in place since the George W. Bush administration.
- Getting rid of it could help Tesla, and it could hurt other EV makers who are struggling with profitability.
Former and future President Donald Trump isn't in office yet, but his transition team is already taking aim at a cornerstone of American EV policy. If Trump gets his way, the longstanding $7,500 EV tax credit is getting axed, a new report indicated today based on statements from transition team sources.
The Trump team is planning to delete the $7,500 incentive for electric car purchases as part of a wider tax bill, Reuters reported on Thursday, citing two sources familiar with the talks.
Tesla, by far the country's biggest seller of EVs, told the Trump team that it's for ending the policy, the sources said. Tesla CEO Elon Musk has developed extremely close ties with Trump in recent months, financing his reelection campaign and reportedly weighing in on key decisions for the new White House. Reuters also indicates the move is driven by the leader of Trump's energy-policy transition team, who has deep ties to Big Oil.
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Trump can't kill the credits through executive action. He'd have to rely on Congress, which now has a Republican majority, to push through his tax plan. Trump would need to kill the credit in order to extend the tax cuts he implemented during his first term and which expire next year, the sources told Reuters.
In response to questions from InsideEVs, Trump-Vance transition team spokeswoman Karoline Leavitt said Trump will deliver on his campaign promises, but she did not confirm the news or elaborate on which other EV policies may be cut.
The Alliance for Automotive Innovation, an auto industry trade group, didn't immediately respond to a request for comment from InsideEVs. But there's reason to believe that the rest of the auto industry won't support Tesla in this move. The group asked Congress last month to keep key parts of the 2022 Inflation Reduction Act intact, including the EV tax credit.
"Sustaining these complementary provisions—including the Advanced Manufacturing Tax Credit, consumer tax credit and commercial leasing credit—is critical to cementing the U.S. as a global leader in the future of automotive technology and manufacturing," the group wrote.
While Musk's firm has a mature and profitable EV business, legacy automakers like Ford and General Motors are still losing money on electric cars as they ramp up sales. Startups like Rivian and Lucid would also be hit hard if the credit went away. They have yet to turn a profit, and they can't fall back on cash-printing combustion-vehicle sales. Getting rid of the subsidy could benefit Tesla by making things harder for its competitors.
Sales of EVs have been more uneven and below what automakers once projected, but they are growing steadily, making up 9% of new vehicle sales in Q3 of this year. A move as drastic as eliminating the $7,500 credit could hurt sales growth during an era when EVs are still, by and large, more expensive than similar gas cars. It could also harm automakers looking to stay competitive globally, Jessica Caldwell, head of insights at Edmunds, said in a statement. EV sales are projected grow rapidly around the world, regardless of U.S. policy.
"The potential elimination of the federal tax credit for electric vehicles by the Trump administration— without another form of incentive to replace it—could derail the trajectory of EV sales in the United States," Caldwell said. "For many automakers, the federal tax credits have been crucial for moving the metal in the U.S. while consumers warm to this technology."
It's still unclear whether Trump plans to gut other EV incentives, like the $4,000 credit for used clean cars or the $7,500 credit for commercial vehicle purchases.
The latter has fueled an EV-leasing boom, since it allows more electric models to qualify for the credit if they're leased rather than bought outright. If Trump managed to eliminate the commercial credit, that could have a greater immediate impact on the EV landscape than any attack on the standard purchase incentive.
Cutting the purchasing credit, which has been in place since the George W. Bush administration, would make electric cars less attainable and more expensive. It could also dampen investments in domestic battery and EV manufacturing, which have boomed since the Inflation Reduction Act passed in 2022. The law overhauled the tax credit, adding stipulations that eligible EVs must be built in North America and must meet rigorous battery-sourcing requirements aimed at reducing reliance on Chinese supply chains.
All those investments, which are largely going to red and purple states, could give the EV tax credit some staying power.
Got a tip about the auto industry? Contact the author: tim.levin@insideevs.com or securely on Signal at Tim_Levin.62
Updated on 11/14 at 5:30 p.m. ET with comments from the Trump transition team and Edmunds.
