But tax credits or not, auto companies aren’t going to back down from their steady transition away from gas-burning cars and trucks, especially given the huge investments they’ve already made. Since 2021, the industry has spent at least $160 billion on plans. According to the Automotive Research Center, electric vehicles are being designed and manufactured.
During his presidential campaign, Mr. Trump denounced the federal tax on electric vehicle buyers (up to $7,500 per vehicle) as part of the “new green scam” that would devastate the auto industry. His transition team is reportedly working on a plan to eliminate tax credits and eliminate stricter fuel economy regulations pushed by the Biden administration. But it’s unclear whether the Trump administration will actually cancel the credits.
Trump’s claim, which most economists dispute, is that if the U.S. rapidly transitions to electric vehicles, most EVs will be made in China, driving up prices for American car buyers. is. He said he would redirect federal revenue recovered from canceled tax credits to building roads, bridges and dams.
Ending the credit, a key provision of President Joe Biden’s anti-inflation law, would almost certainly reduce EV sales, which have been growing in the U.S. this year, although not as fast as automakers had expected. It will be. Slowing growth has forced nearly all car companies to scale back EV production and slow construction of battery factories they no longer need to accommodate a more gradual transition.
Jonathan Chalif, an executive at Midway Ford in Miami, one of the company’s top EV dealers, said he thinks the end of the tax credit will hit sales hard. He noted that the credit lowers monthly payments and brings the price of EVs closer to gasoline-powered cars. “It’s going to be more affordable,” he said. “Otherwise, those people won’t be able to afford the payments.” Charif said the $7,500 credit will reduce buyers’ monthly payments by $200 to $250, and many will We calculated that there is a possibility that you will be able to purchase . The average selling price for an electric car is about $57,000, compared to about $48,000 for a gas-powered car, according to Cox Automotive. (Although they have higher upfront costs, EVs generally have lower operating costs because they have lower maintenance costs and, in most cases, electricity costs much less than gasoline.)
To qualify for the credit, the EV must be manufactured in North America. EVs that contain battery components or minerals from China or other countries considered to be an economic or security threat to the United States will only receive half of the federal credit. Due to this restriction, most of the 75 EV models sold in the U.S. are not eligible for the full credit. But all EVs will receive the full value of their leases, a benefit President Trump will likely aim for. Some plug-in gas-electric hybrid vehicles are also eligible for the credit.
When asked about the president-elect’s opposition to the EV tax credit, the Trump transition team would simply say, “We are tasked with delivering on the promises we made during the campaign.”
Elon Musk, a close ally of President Trump and co-leader of a committee aimed at identifying ways to drastically shrink the federal government, appears to be aligned with the president-elect on canceling tax credits. . Musk, the Tesla billionaire who spent an estimated $200 million to elect Trump, said the end of the credit would hurt rivals more than Tesla, by far the leader in U.S. EV sales.
“It would be devastating for our competitors, and it would be a bit of a blow to Tesla as well,” he said.
Even so, it may be difficult for President Trump to cancel the credits without support from the new Republican-led Congress, many of whose members represent districts where EV credits are popular. President Trump has floated the idea of using a constitutional theory that would allow the president to decide whether to spend money appropriated by Congress. The president-elect has promoted the concept of a “reservation,” in which Congressional spending sets limits, but not floors, on federal spending.
John Helveston, an assistant professor at George Washington University who studies electric vehicles and policy, said the foreclosure theory doesn’t apply in this situation because the EV tax credit affects government revenue, not a diversion. Ta.
In any case, Helveston said he doubts President Trump will be able to convince Republican lawmakers to remove the deduction from the Inflation Control Act since so many congressional districts benefit from tax cuts. .
“If the EV tax credit is cut, battery factories in town will have a harder time selling their products,” he noted.
David Rapallo, an associate professor of law at Georgetown University, said a 1974 federal law prohibits presidents from substituting their own views on spending plans. Rapallo said if President Trump were to cancel the tax credits, it would be challenged in court.
JD Power research shows that once people learn about the tax credit, they’re much more likely to consider an electric vehicle. Meanwhile, federal subsidies for converting factories to EV production, as well as buyer tax credits, are helping General Motors, Ford and Stellantis move away from costly gasoline-powered vehicles. are. It’s also helping Detroit’s Big Three compete with foreign rivals, especially Chinese automakers that have received government subsidies and a head start on EV development, according to consultancy Autoforecast Solutions. Vice President Sam Fiorani said.
At the moment, Ford and GM are profitable overall, but unlike Tesla, they are losing money on their EV business, but both companies are growing their electric vehicle business as costs ease and more vehicles are sold. We expect the company to generate positive revenues in the coming years.
Fiorani suggested that eliminating the federal tax credit “will negatively impact the Detroit Three in the long run by making them less competitive with global companies making technological leaps in electric vehicles.”
GM, Ford and Stellantis all declined to comment, but executives have said in the past that they will continue to sell gasoline and hybrid vehicles while also developing EVs. The Automotive Innovation Alliance, an industry group representing most automakers, sent a letter to President Trump supporting the tax credit, saying it would help the U.S. “take the lead in manufacturing that is critical to our national and economic security.” It was claimed that this would help ensure that the government continues to hold on to the situation.
South Korean automaker Hyundai, which has spent more than $7 billion on an electric vehicle factory in Georgia, could also be hit. The company has accelerated construction of a giant factory near Savannah and is now building EVs in the U.S., hoping to take advantage of tax credits for buyers.
In the end, most automakers say their ambitious plans for transitioning to electric vehicles remain the same, regardless of policy changes in Washington.
David Christ, executive vice president of Toyota North America, which is building a battery factory in North Carolina, said: “We are long-term planning and don’t factor political considerations into how we approach product development or capital investment.” ” he said.
