Why December could be your final shot at a $7,500 EV tax credit

The electric vehicle (EV) market is bracing for seismic shifts following the election of Donald Trump, whose policy proposals could have far-reaching implications for automakers and consumers alike.

A pivotal issue is the potential elimination of the $7,500 federal tax credit for EV purchases—a move that could reshape the competitive landscape.

Policy shake-up

Trump has signaled his intent to abolish the EV tax credit, possibly even retroactively to January 1, 2025. This policy, a cornerstone of federal support for EV adoption, has spurred millions of electric vehicle sales over the past decade. Experts predict its disappearance could dent consumer demand and force automakers to rethink their EV strategies.

“I would be very inclined to say yes, it’s going away,” Ivan Drury, director of insights at Edmunds, told CNN. Drury emphasized that the Trump administration could take a straightforward approach, potentially through early tax legislation or a new IRS rule.

For prospective EV buyers, the timing couldn’t be better. The combination of the current tax incentive and record inventories of EVs at dealerships presents a unique buying opportunity. According to Edmunds, about 64% of EVs sitting on lots are last year’s models—nearly double the rate for traditional vehicles—prompting automakers to offer steep financing incentives.

“If you buy an EV now, you’re not only sure of getting the tax credit, you’ve got automaker incentives,” Drury explained. “You’re doubling down. It won’t get any better.”

The Tesla-Trump alliance

Tesla, often viewed as a frontrunner in the EV market in the U.S., finds itself in a unique position. CEO Elon Musk, an influential advisor to Trump, has openly advocated for the elimination of the tax credit, arguing it would “only help Tesla.” Musk’s rationale lies in Tesla’s competitive edge—the company’s scale and profitability position it to weather the policy change better than its rivals.

But the auto industry has been fighting to preserve the tax credit. The Alliance for Automotive Innovation, an industry trade group that includes most automakers (except for Tesla) wrote a letter to Congress in October, urging that the tax credit remain in place. Legacy automakers including General Motors, Ford, and Stellantis, are relying heavily on federal incentives to compete with Tesla. Smaller upstarts such as Rivian could also face significant headwinds, potentially scaling back production and delaying new launches.

Despite the potential policy shift, industry experts remain cautiously optimistic about the EV market’s trajectory. Chris Hopson, principal automotive analyst for S&P Global, told CNN that even without federal support, “automakers can play with pricing to adjust for lack of credits. And some states, like California, may step up with their own tax incentives.”

Broader impact on policy and industry

During his campaign, Trump criticized the EV industry while promising to roll back ambitious targets set by the Environmental Protection Agency (EPA), including a mandate that 35% of new cars sold by 2032 be electric. However, his relationship with Musk has introduced complexities, as Tesla would stand to benefit from reduced competition in a post-tax-credit landscape.

As the auto industry grapples with these changes, the coming months will be critical in determining how consumers, manufacturers, and policymakers adapt to the shifting sands of the EV market.