By admin 
The prospect of a future Trump Administration eliminating the $7,500 federal electric vehicle (EV) tax credit, a cornerstone of the Biden administration’s climate and industrial policy renewed under the Inflation Reduction Act (IRA), looms large over the burgeoning U.S. EV market. This potential policy reversal, signaled by former President Donald Trump’s rhetoric, could trigger a cascade of negative effects, not only by raising the effective prices of EVs for consumers but also by severely impacting the nascent domestic EV manufacturing sector and its associated job creation, according to a compelling new study.
Released by the REPEAT Project, a Princeton University program renowned for its rigorous analysis of environmental policy, the study offers a stark warning. While acknowledging that not all EVs currently sold in the U.S. qualify for the credit due to its stringent requirements, the report concludes that rescinding this incentive would inevitably lead to a significant decline in sales. This downturn, in turn, would have profound repercussions for the health and competitiveness of U.S. manufacturing, a sector that has seen unprecedented investment in EV and battery production in recent years.
"The report is also the only analysis I’m aware of to date that draws the connection to U.S. manufacturing as well," Jesse D. Jenkins, assistant professor at Princeton and project leader of the study, conveyed to Electrek in an emailed statement, underscoring the unique and critical insight offered by their research. This connection highlights that the federal EV tax credit, officially known as the Clean Vehicle Credit, is not merely an environmental incentive but a powerful tool of industrial policy designed to reshore manufacturing and create high-paying American jobs.
The Inflation Reduction Act (IRA), signed into law in August 2022, represented a landmark legislative effort to combat climate change, enhance energy security, and revitalize American manufacturing. Within its expansive framework, the IRA significantly revamped and extended the EV tax credit, transforming it from a simple consumer rebate into a complex mechanism aimed at building a robust, domestic EV supply chain. Prior to the IRA, the federal EV tax credit, while available, was subject to manufacturer sales caps (200,000 vehicles per automaker), which meant popular models from Tesla and General Motors had already phased out of eligibility. The IRA removed these caps but introduced a new set of demanding criteria:
- North American Assembly: Vehicles must undergo final assembly in North America.
- Battery Component Sourcing: A specified percentage of battery components must be manufactured or assembled in North America.
- Critical Mineral Sourcing: A specified percentage of the battery’s critical minerals must be extracted or processed in the U.S. or a country with which the U.S. has a free trade agreement, or be recycled in North America.
- Price Caps: The manufacturer’s suggested retail price (MSRP) cannot exceed $80,000 for vans, SUVs, and pickup trucks, or $55,000 for other vehicles (like sedans).
- Income Caps: Buyers must meet certain income thresholds ($150,000 for single filers, $300,000 for joint filers).
These stipulations were meticulously crafted to reduce America’s reliance on foreign supply chains, particularly those dominated by China, and to stimulate domestic investment and job creation in every segment of the EV ecosystem, from mining and refining to battery cell production and vehicle assembly. The IRA also introduced a new commercial clean vehicle credit and a manufacturing credit (45X) to further incentivize domestic production, creating a comprehensive industrial strategy. Furthermore, starting in 2024, the clean vehicle credit became available as a point-of-sale rebate, making the financial benefit more immediate and accessible to consumers, rather than requiring them to wait until tax season.
Former President Donald Trump has consistently expressed skepticism, if not outright hostility, towards electric vehicles, often characterizing them as an imposition on American consumers and a detriment to the auto industry. His rhetoric frequently dismisses climate change concerns and criticizes policies aimed at transitioning away from fossil fuels. Trump’s "America First" agenda, while ostensibly focused on domestic manufacturing, has often clashed with the specific industrial policy mechanisms of the IRA, which he and his allies have frequently targeted for repeal. He has called the IRA a "scam" and pledged to "terminate" parts of it.
It is crucial to clarify that a president cannot unilaterally eliminate a federal tax credit. Such an action would require a coordinated repeal by Congress. However, a Trump administration, potentially backed by a Republican-controlled Congress, could push for legislation to dismantle the IRA’s EV provisions. Even without a full repeal, an administration can significantly influence policy through regulatory enforcement, appropriations, and by signaling a lack of support, which can deter investment and create market uncertainty. The political will for such a repeal would likely stem from a desire to roll back perceived government overreach, reduce federal spending, and cater to segments of the electorate critical of environmental mandates.
The REPEAT Project study’s findings paint a dire picture of the consequences of such a repeal. Without the critical $7,500 tax credit, the study projects a substantial contraction in the EV market. Specifically, EV sales could decrease by a staggering 30% by 2027 and nearly 40% by 2030. To put this into perspective, if the U.S. were projected to sell, for example, 3 million EVs in 2027, a 30% reduction would mean 900,000 fewer EVs on the road. This dramatic drop in demand would severely impede the nation’s transition to electric transportation.
The study also predicts a significant decline in the projected EV market share. Without the credit, the anticipated market share of EVs could fall from 18% to 13% in 2027, and from 40% to a mere 24% in 2030. These numbers represent not just a slowdown but a profound shift away from the trajectory needed to meet climate goals and remain competitive in the global automotive landscape. Missing these market share targets would mean millions more gasoline-powered vehicles remaining on the road, contributing to greenhouse gas emissions and continued reliance on fossil fuels.
The most alarming projections from the study relate directly to U.S. manufacturing. Analysts predict that this decrease in EV demand could lead to 100% of planned expansions of assembly plants for EV production being shuttered or canceled. This is not a hypothetical threat; major automakers like General Motors, Ford, Stellantis, Hyundai, and Volkswagen have announced tens of billions of dollars in investments to retool existing factories and build entirely new ones across the American South and Midwest, specifically to ramp up EV production. These include massive battery Gigafactories in states like Georgia, Michigan, Kentucky, and Tennessee, which are designed to localize the battery supply chain. The cancellation of these expansions would mean not only the loss of future jobs but also a squandering of the strategic advantage the U.S. is attempting to build.
Furthermore, the study warns that between 29% and 72% of current battery-manufacturing capacity could become redundant this year. Redundancy in this context translates to underutilized factories, halted construction projects, and, most critically, widespread layoffs. The ripple effect would extend throughout the entire EV supply chain, from raw material extraction and processing companies to component suppliers and charging infrastructure developers. Thousands, potentially tens of thousands, of direct and indirect manufacturing jobs that were promised and are in the process of being created, could vanish. This would be a severe blow to regions that have pinned their economic revitalization hopes on the clean energy transition.
The broader economic and industry impact of eliminating the EV tax credit would be profound. Major automakers have already committed colossal sums – hundreds of billions of dollars globally, with significant portions earmarked for the U.S. – to transition their product portfolios from internal combustion engines (ICE) to EVs. These strategies are predicated on government incentives, consumer demand, and global emissions targets. A sudden removal of a key consumer incentive would throw these long-term plans into disarray, potentially leading to reduced profitability, decreased stock values, and a reevaluation of their U.S. investment strategies. Such uncertainty is a major deterrent for future capital expenditure.
From a global competitiveness standpoint, rescinding the credit would severely handicap the U.S. in the race against China and Europe, both of which have robust industrial policies and consumer incentives supporting their domestic EV industries. The IRA was designed to help the U.S. catch up; its repeal would effectively surrender market share and technological leadership to foreign competitors.
For consumers, the impact is straightforward: a $7,500 price increase for qualifying EVs. For many potential buyers, particularly those in middle-income brackets, this credit is the difference between an EV being an aspirational purchase and an affordable reality. It helps offset the higher upfront cost of EVs compared to their gasoline counterparts. Without it, EVs become less competitive, pushing more consumers back towards ICE vehicles. This would not only slow adoption but also potentially lead to reduced choice in the market as automakers might scale back less profitable EV models.
Beyond the economic fallout, the environmental and energy security implications are equally significant. Slower EV adoption directly undermines the U.S.’s ambitious climate goals, including President Biden’s target of reducing emissions by 50-52% below 2005 levels by 2030. Fewer EVs on the road mean continued reliance on fossil fuels, contributing to greenhouse gas emissions and exacerbating climate change. It also means foregoing the benefits of improved urban air quality associated with zero-emission vehicles. From an energy security perspective, accelerating EV adoption is a strategic move to reduce dependence on volatile global oil markets and hostile foreign energy sources. A reversal would perpetuate this vulnerability.
While the REPEAT Project study highlights a critical perspective, it’s also worth acknowledging that some critics of the IRA and EV subsidies argue that the EV market should eventually stand on its own without government intervention. Concerns about the overall cost of the IRA to taxpayers, the fairness of the current credit structure, and whether subsidies distort market forces are often raised. However, proponents argue that strategic subsidies are necessary to nurture nascent industries, overcome market failures, and achieve public goods like clean air and energy independence, especially when competing with heavily subsidized global rivals.
In conclusion, the potential elimination of the federal EV tax credit by a future Trump administration is far more than a simple policy adjustment. It represents a fundamental pivot with profound implications for the U.S. economy, its manufacturing sector, the job market, and its climate and energy security goals. The REPEAT Project study serves as a stark warning: rescinding this credit would not only make EVs less affordable for American families but could also dismantle the burgeoning domestic EV and battery manufacturing industry, leading to significant job losses and a surrender of America’s competitive edge in a critical future technology. The debate over the EV tax credit is, therefore, not just about environmental policy; it is about industrial policy, economic leadership, and America’s future standing in a rapidly evolving global landscape. The political battle ahead promises to be intense, with the future of American manufacturing and clean energy hanging in the balance.