In a major policy shift, President-elect Donald Trump's transition team is reportedly preparing to eliminate the $7,500 federal tax credit for electric vehicle (EV) purchases. This measure, which has played a significant role in fostering the U.S. EV market, would be part of a broader tax reform initiative aimed at scaling back President Joe Biden's clean energy policies.
The elimination of the EV tax credit could stall the growth of electric vehicles in the U.S., especially as the country faces challenges in expanding its EV market. Tesla, the largest EV manufacturer in the U.S., appears to support ending the subsidy, according to sources familiar with recent transition meetings. Tesla CEO Elon Musk, who has aligned himself with Trump’s policies, reportedly believes Tesla could endure the loss but that other automakers, including General Motors (GM) and Ford, would be hit harder. Following the news, Tesla's stock fell 4%, closing at $316.61.
The energy-policy transition team, led by billionaire oil executive Harold Hamm and North Dakota Governor Doug Burgum, has been meeting at Trump’s Mar-a-Lago estate to discuss specific actions. Trump’s team views the EV tax credit as an "easy target" for budget cuts, especially given the projected support from a Republican-majority Congress. The plan is to incorporate this cut into a broader tax reform bill that also funds an extension of Trump’s previous tax cuts, which are set to expire.
The Alliance for Automotive Innovation, which represents most major automakers excluding Tesla, previously urged Congress to keep the tax credit. In a letter to Congress last month, the alliance argued that retaining the credit is crucial for maintaining the U.S. lead in automotive technology.
Trump has frequently criticized Biden's "EV mandate" on the campaign trail, although he has not specified which clean energy measures would be cut. The transition team has identified some aspects of Biden's Inflation Reduction Act (IRA) as too difficult to dismantle due to their existing funding allocations, including programs in Republican-led states.
However, killing the EV tax credit could be more feasible. Trump's team aims to use a legislative tactic called reconciliation, which Biden used for the IRA, to sidestep Democratic opposition.
