As of December 2024, the landscape for electric vehicle (EV) incentives in the United States is poised for changes. The federal tax credit, which currently offers up to $7,500 for new EV purchases and up to $4,000 for qualifying used EVs, faces an uncertain future with the incoming Trump administration. This potential policy shift has prompted consumers and industry experts to consider the implications for EV adoption.
Federal tax credit
The federal tax credit for EVs has been a pivotal factor in promoting electric mobility across the US Established during the George W. Bush administration, the credit has undergone various modifications, including significant revisions under President Biden’s Inflation Reduction Act. In 2024, a notable change allowed consumers to receive the credit as an upfront rebate, effectively reducing the vehicle’s purchase price at the point of sale.
Potential policy reversals under the Trump administration
The Trump transition team has indicated plans to roll back several of President Biden’s EV and emissions policies. Proposed changes include ending support for electric vehicles and charging infrastructure, imposing tariffs on global battery materials to boost US production, and reverting emissions standards to 2019 levels. These measures aim to prioritize national defense and reduce reliance on foreign critical minerals.
Consumer response: A surge in EV purchases
The possibility of losing federal incentives has led to a noticeable increase in EV sales. According to Cox Automotive, EV sales rose by approximately 10% in November 2024, as consumers hurried to take advantage of existing credits. Alex Lawrence, who operates a Utah dealership specializing in used EVs, observed that while many consumers remain unaware of the tax credit, those informed are acting swiftly. “There are still many, many, many, many, many more people that don’t even know this exists,” he noted. However, informed buyers are concerned and moving quickly to secure their purchases.
Frank Shorter of Cary, North Carolina, exemplifies this trend. Initially planning to purchase an EV in the coming years, Shorter expedited his decision post-election. “After the election, the writing was on the wall that the tax credit might go away… and, you know, these tariffs looming on the horizon, potentially — it just felt like the prices were about to go up,” he explained. He promptly acquired a new Ford F-150 Lightning, benefiting from a combination of Ford’s 0% financing offer and the $7,500 tax credit, which he described as “a screaming deal.” The tax credit “made it so that it was within our reach,” he added.
Industry implications
The potential rollback of federal incentives has implications for the EV market. Analysts suggest that current favorable pricing conditions may not persist. Ivan Drury of Edmunds advises, “For consumers interested in an EV purchase, strike while the battery is hot.” He notes that while EVs have been available at attractive prices due to lower-than-expected demand, automakers are now adjusting production. “Now, with production cuts shrinking supply and a fresh wave of demand from those seeking a deal while they still can, it can be all but assured that the price for that EV you’ve been eyeing is going up in the coming months,” Drury warns.
Despite potential federal changes, some states may continue to offer their own incentives. For instance, Colorado provides generous tax credits for EVs, and California’s governor has pledged to reinstate state incentives if federal support diminishes. Additionally, automakers are planning to introduce more affordable EV models in the near future, though pricing remains uncertain, especially with potential tariffs that could increase vehicle costs.
Key considerations
For consumers considering an EV purchase, understanding the current tax credit is important. As of 2024, the credit is available as an upfront rebate, simplifying the purchasing process. This change allows buyers to benefit immediately, regardless of their tax liability.
Leasing an EV has become particularly advantageous due to a loophole that bypasses certain eligibility restrictions. However, the Trump administration is expected to close this loophole, which could impact the attractiveness of leasing options. Stephanie Valdez Streaty of Cox Automotive anticipates an increase in leasing activity as consumers seek to capitalize on current benefits before potential policy changes. “The leasing loophole is such an attractive option for consumers,” she remarks.
The used vehicle credit, offering up to $4,000, has been instrumental for lower- and middle-income buyers. Alex Lawrence highlights that the upfront rebate can serve as a down payment, enabling purchases that might otherwise be unattainable. However, he cautions that demand for affordable used EVs exceeds supply and advises buyers to be vigilant about pricing practices to ensure compliance with legal requirements.
