US car and truck buyers can no longer claim a federal tax credit of up to $7,500 for electric vehicle (EV) and plug-in hybrid that has been available for 15 years, a result of changes enacted through US president Donald Trump's tax and energy law passed earlier this year.
The tax credit terminated at midnight Tuesday, ending a subsidy that industry officials credit with bolstering sales of vehicles such as the Tesla Model Y and the Chevrolet Equinox EV. The US Congress created the tax credit in a bipartisan 2008 law signed by former US president George Bush, aiming to jump-start sales of EVs that typically had higher costs and lower range compared to conventional vehicles.
But Republicans gradually soured on the tax credit, particularly after Democrats expanded it in 2022 in the Inflation Reduction Act. Oil companies had heavily opposed the subsidy, which they worried was working in tandem with EV-focused tailpipe standards set under US former president Joe Biden to crimp future gasoline demand. Earlier this year, Republicans voted to eliminate it through Trump's tax law as of 30 September, a change expected to save the government more than $190bn over a decade.
The end of the tax credit could pose challenges to future sales of EVs, which as of June cost about $8,000 more than the average vehicle, according to research firm Cox Automotive. EV manufacturers say although they are confident in their long-term growth, the expiration of the tax credit will remove an incentive for building out supply chains in the US. The tax credit, as revised in 2022, restricted eligibility to vehicles produced in the US.
"The end of this credit removes one of the most effective levers we have seen in onshoring jobs, creating new economic opportunities for Americans and making the US more globally competitive," Zero Emission Transportation Association executive director Albert Gore said.
The Trump administration has separately proposed repealing all greenhouse gas restrictions on cars and trucks, while the Republican-controlled Congress voted earlier this year to "disapprove" federal waivers allowing California to enforce strict EV-focused tailpipe standards.
California and other Democratic-led states say they will continue work to support EVs, which they see as a way to cut emissions that are contributing to climate change. California is pursuing emergency regulations that would uphold its state-specific tailpipe standards until a court resolves "uncertainty" created by the disapproval of its federal waiver. But California governor Gavin Newsom (D) last month acknowledged the state's efforts could not fully offset the loss of the $7,500 tax credit.
"We can't make up for federal vandalism of those tax credits, but we can continue to make the unprecedented investments in infrastructure," Newsom said after signing a package of clean energy laws.
