How the Election Might Affect the U.S. EV Tax Credit

Discussion
1

I’m an energy lobbyist in D.C., and I’ve kept folks updated here on the Inflation Reduction Act (IRA) negotiations in 2022, which changed the EV tax credit. Here’s where things are currently.

Why does this election matter for the EV tax credit?

So far, the Republicans have taken the Senate with a 3-vote majority and are likely to win the House as well. If one party holds the Senate, House, and White House, they can use something called Budget Reconciliation to pass legislation without needing 60 votes in the Senate. That’s how the IRA, Trump’s 2017 tax cut, and the Affordable Care Act were passed.

Since parts of Trump’s tax cuts will start expiring in 2025, they’ll be looking at more tax changes. To fund other priorities, they’ll likely look for places to save money, and unfortunately, the EV tax credit could be an easy target.

What changes could we see? Will it go back to the pre-IRA version?

It’s unclear, but they might just sunset the EV credit entirely. They could also make it so difficult to qualify that most EVs wouldn’t meet the requirements, like further lowering the MSRP limit or requiring the supply chain to be U.S.-based. I think it’s more likely they’ll simply sunset it, though.

When could these changes happen?

Budget reconciliation takes time, so I’d expect that 2025 could be the last year to get an EV credit, but there’s no guarantee. It could move faster, so anyone thinking about buying an EV should probably consider doing it sooner.

But what about Elon Musk in the White House? Won’t that change things?

Even if it’s a blow to Tesla, it’d be worse for other EV companies still building their EV programs. Tesla already has a big advantage in the U.S., so Musk might actually be fine with changes that hurt his competitors more than Tesla.

What should we be watching?

First, watch to see if Republicans secure 218 House seats. If they do, the process will likely start in the House’s Ways and Means Committee. They’ll hold hearings and share documents outlining their ideas for tax reform. While I expect the credit to sunset, the exact timing is still unknown, so stay tuned as we get more information in the months ahead.

2

It’s likely the GOP will also cut the NEVI funding. Only $1.5B of the $5B has been used, so that’s a lot of potential funding for EV charging infrastructure that could get canceled. Lack of charging stations is a huge reason people hesitate to buy EVs, even more than the cost difference with ICE cars. Cutting this would seriously hurt EV adoption.

3

@Connie
Tesla’s supercharger network would definitely benefit if they cut NEVI. Tesla’s network is already massive and opening up to other EVs, so taking away NEVI funds would just strengthen their position.

4

@Ronald
Exactly, which is why Musk supports moves to end NEVI. Tesla would profit, but it would hurt EV adoption in general. Fewer competitive chargers mean more people rely on Tesla’s network.

5

Connie said:
@Ronald
Exactly, which is why Musk supports moves to end NEVI. Tesla would profit, but it would hurt EV adoption in general. Fewer competitive chargers mean more people rely on Tesla’s network.

Tesla actually has a big edge with NEVI. The funding can be used for retrofitting existing stations or building new ones. Tesla can retrofit an existing station for $150k, while competitors like EVGo have to spend $1M to build from scratch. So they’re able to bid lower and win more contracts, like they did with 17 projects in Colorado’s latest NEVI round.

6

@jessicah
True, but Musk’s support for cutting NEVI is about making it harder for new competitors. It’s good for his business if the government support disappears.

7

@Ronald
If Tesla already has a huge network that’s opening to everyone, why does the government need to fund competitors?

8

Nathan said:
@Ronald
If Tesla already has a huge network that’s opening to everyone, why does the government need to fund competitors?

More competition means better options for EV owners.

9

Great post, very clear on the facts. Thanks for the update!

10

Yeah, I’d buy an EV soon if you’re thinking about it. This tax credit is probably going to be one of the first things to go.

11

Can they take the credit away after you’ve already purchased an EV?

12

Randy said:
Can they take the credit away after you’ve already purchased an EV?

No, that would be an ex post facto law, which is unconstitutional.

13

Randy said:
Can they take the credit away after you’ve already purchased an EV?

Right, they’d likely set a clear cutoff date for new purchases if they make changes.

14

Won’t cutting the credit be tough since it’s brought so much investment to red states? Hyundai’s factory in Georgia, VW in Tennessee…

15

olivia said:
Won’t cutting the credit be tough since it’s brought so much investment to red states? Hyundai’s factory in Georgia, VW in Tennessee…

Yeah, but it wouldn’t be the first time they’ve made decisions that hurt their own constituents. Just look at the recent election results.

16

My two EVs were bought without any tax credits. Even without the credit, the cost to run and maintain our EVs is way lower than ICE cars. Per mile, we’re only paying about 20% of what we’d spend on gas. I’d say if you’re thinking of switching, the cost savings are still worth it even if the credit goes away.

17

Thanks for the info! I bet we’ll see more wages getting reclassified as ‘tips’ if the tax bill includes no tax on tips.

18

EVs are close to cost parity with gas cars, which helps. However, cutting NEVI funding could slow down the national charging network, which would impact people’s willingness to buy an EV.

19

Quick correction: the Affordable Care Act was passed through the normal process, not Budget Reconciliation. It passed with a 60-39 vote.

20

Honestly, removing the EV tax credit makes sense. With more affordable EVs on the market, subsidies aren’t as necessary anymore.