It’s the top of the road for US electric vehicle tax credits.
Sweeping tax and budget laws approved by Congress on Thursday means $7,500 tax credits for purchasing or leasing recent electric vehicles will end on Sept. 30, in addition to a $4,000 used EV credit, which have helped juice green vehicle sales lately.
The Electrification Coalition, an EV advocacy group, said on Thursday “as EVs secure a growing share of the worldwide automotive market, it is apparent that the longer term of transportation is electrical; this bill forfeits America’s role in that future to China.”
Congress first approved a $7,500 EV tax credit in 2008 that it phased out after manufacturers hit 200,000 vehicles. The credit was expanded in 2022 to cover leased vehicles and the per manufacturer cap was lifted.
Individually, US automakers stand to receive significant advantages from the ultimate bill that eliminates penalties for failing to fulfill Corporate Average Fuel Economy shortfalls. The measure makes it easier for automakers to construct gas-powered vehicles.
Barclays auto analyst Dan Levy said the tax credit phase-out in lower than three months means EV sales will significantly jump via a “pre-buy” since some consumers will move up purchases planned for later with sharp declines within the months to follow.
“We consider the bill reiterates the slowdown ahead for EV penetration within the US, with each the ‘carrot’ (i.e. tax credits/incentives) and the ‘stick’ (i.e. emissions regulations) softened,” Levy wrote in a research note.
A Harvard University study released in March forecast that ending the EV tax credits would cut back EV penetration by 6% by 2030 and would save the federal government $169 billion in EV tax credits over a decade.
Last yr, Chrysler parent Stellantis paid $190.7 million in civil penalties for failing to fulfill US fuel economy requirements for 2019 and 2020 after paying nearly $400 million for penalties from 2016 through 2019. GM previously paid $128.2 million in penalties for 2016 and 2017.
In the ultimate bill, Congress dropped a planned $250 annual fee for EVs to pay for road repairs, in addition to a requirement that the US Postal Service unload its EV delivery vehicles.
