There’s a ‘real risk’ Trump could axe the $7,500 electric vehicle tax credit in 2025 — 3 reasons to act now

Why the EV credit might be a goner

Sources speaking to The New York Times and Reuters have said Trump's transition team is planning to kill the Biden administration's $7,500 consumer tax credit for electric-vehicle purchases. It has faced sharp criticism from Republicans and Trump campaigned on broad tax reform and often said he’d kill Biden’s “EV mandate.” His administration’s track record on environmental policies and clean energy suggests he won’t waste time. Trump has said he plans to prioritize domestic oil production by fast-tracking drilling approvals, part of his goal of cutting energy costs in half within the first 18 months of his second term.

“There’s no question there’s real risk in the EV credit going away” in 2025, said Jamie Wickett, a partner at law firm Hogan Lovells who specializes in federal tax policy, energy and the environment, to CNBC. “If you’re a consumer in the market for an EV, I would without a doubt push that into 2024, if at all possible — whether an outright purchase or a lease — just to reduce the risk of the credit going away."

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What does eliminating the credit mean?

Losing the $7,500 tax credit would remove a key incentive that made EVs affordable for Americans, especially as prices remain higher compared to traditional gas-powered vehicles. Without it, EV adoption could slow significantly, as fewer middle-income consumers would be able to justify the cost.

Additionally, automakers have leaned heavily on the credit to bolster sales and meet federal emissions standards. A rollback could disrupt production plans and make it harder for the U.S. to compete with countries like China, which is aggressively expanding its EV market through government incentives and support.

Advocates for ending the U.S. credit say the incentive unfairly subsidizes EVs which they believe should succeed or fail without government help. Eliminating the credit now, just as EVs are becoming mainstream, would challenge companies like Ford and GM to compete as they increase EV production.

"It would be so counterproductive," U.S. Energy Secretary Jennifer Granholm told reporters at the recent COP29 climate conference. "You eliminate these credits, and what do you do? You end up ceding the territory to other countries, particularly China."

As for Trump supporter Elon Musk, whose Tesla brand is synonymous with EVs, dumping the tax credit could help solidify the automaker’s lead among EV producers. In July, he tweeted, “Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!”

Newsweek noted that Tesla is currently the only major U.S. automaker generating consistent profits from its EV sales and the firm has had longer than other companies to benefit from government subsidies. According to the report, “In 2010, Tesla received a $465 million loan from the Department of Energy to produce electric vehicles and to develop a manufacturing facility in Fremont, California. The loan was paid off in 2013. The company also benefitted from nearly $3 billion from the credits offered to EV buyers, according to Subsidy Track's database, which tracks subsidies from 2000 to today.”

Should you act now?

For prospective EV buyers, uncertainty around the tax credit is a green light to act now. Here are three reasons why locking in your purchase could be a smart move:

• Get the money, now: The tax credit remains in place, but its future is endangered. By purchasing an EV before any legislative changes take effect, you can take advantage of the full $7,500 benefit. Many automakers are also offering additional incentives, such as rebates and discounted financing, making this an ideal time to buy.
• Beat price hike: If the tax credit disappears, automakers may raise prices to offset lost sales. EV manufacturers rely on the credit to make their vehicles more appealing to cost-conscious buyers. Acting now allows you to lock in current pricing and avoid paying more later.
• Fuel savings: Even without the tax credit, EVs are cheaper to operate and maintain than gas-powered cars. By transitioning to an EV now, you can start reaping the benefits of lower fuel and maintenance costs, which add up over time.