New YorkPerhaps now is the ideal moment to get an electric car. This is due to the possibility that a $7,500 federal tax credit may soon be eliminated.
Donald Trump, the president-elect, has stated that he will take action to abolish the tax credit, potentially as soon as he assumes office. The loss of the tax credit might even be retroactively retroactive to the first of January, giving EV customers just one week to make sure they lock in the credit.
Ivan Drury, head of insights at Edmunds, a website that sells cars, stated, “I would be very inclined to say yes, it’s going away.” Drury said he anticipates the credit won’t be around for long under the next administration, even if it’s unclear exactly how Trump will do so. In early 2025, Republicans are promised tax legislation that could include this measure. Or the Internal Revenue Service, which is under Trump’s administration, might just make a new rule that would prevent the credit.
According to Drury, individuals are prone to choose the most straightforward path available.
However, the tax credit is only one factor that may encourage prospective EV customers to take action now rather than later. This may be the best moment to purchase an EV because of the government tax incentive and declining sales.
Earlier this year, record inventories of electric vehicles were found on dealer lots due to a slowdown in American purchasers’ desire and an increase in the variety of EV models available. This oversupply is still present. According to Drury, nearly twice as many EVs as conventional internal combustion vehicles—64 percent of EVs in dealerships—are models from the previous year. Instead of waiting for the new year, automakers usually unveil the models for the following year in the fall.
Legacy automakers are trying to market the older EV models by offering enticing financing terms as a result of the overabundance of EVs and heightened competition. According to Edmunds data, the average lease payment for non-Tesla EVs has decreased by 40% since the beginning of 2023, which is significantly greater than the decline in the transaction price alone. The lease’s average interest rate has been reduced by over half, which is the difference.
If you buy an EV now, you re not only sure of getting the EV tax credit that might not be there for much longer, you got incentives from automakers that can t move them, said Drury. You’re going all out. It will not improve.
Industry caught in the lurch
The loss of the tax credit, and the inevitable weaker demand that would follow, could lead legacy automakers to pull back on their EV production more than they already have, Drury said. Therefore, the current incentives may also disappear.
It’s likely that the auto industry will battle to keep the tax credit in place. The Alliance for Automotive Innovation, an industry trade group that includes most automakers but not Tesla wrote aletter to Congressin October, ahead of the election, urging that the tax credit remain in place.
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But the group and individual automakers declined to comment on their plans, or their views on what happens if the tax credit goes away, when contacted recently by CNN.
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The disappearance of the tax credit would probably hurt legacy automakers planning to roll out more EVs in the coming years, such as General Motors, Ford and Stellantis, or other small EV upstarts like Rivian, none of which have profited off of EV sales yet, due in large part to vast startup costs. If demand for EVs falls along with the disappearance of the tax credit, those automakers could be forced to pull back on their EV production to trim their losses, reducing competition for Tesla among EV car shoppers.
Even with the slowing EV demand, many experts still forecast that total US sales of EVs could continue to edge higher, just at a much slower pace than in the past.
We still have upwards of 20 EV models coming into the market in 2025, said Chris Hopson, principal automotive analyst for S&P Global. He said those increased offerings will bring in new buyers, and more electric cars will be sold as a result.
He said that if the tax credit disappears early in the year, it could cause S&P to pull back on its EV forecast somewhat, but he would still expect a modest gain. But how the automakers react to the lack of tax credit could determine how much sales fall. They could cut prices more than they have in recent years.
Automakers can play with pricing to adjust for lack of credits, Hopson said.
And some states may step up with their own tax credits to make up for the loss of federal tax credits. That s something California is looking to do.
During the campaign President-elect Donald Trumpfrequently criticized EVs, though he qualified that criticism once Musk became one of his more prominent, and financially important, supporters. Still, Trump promised to get rid of an electric vehicle target from the Environmental Protect Agency of a minimum of 35% of new cars sold by 2032, which he refers to as an EV mandate.
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