(NewsNation) — Electric car owners could see $7,500 less on their tax returns once the new presidential administration takes over, and the car market could see fewer electric vehicle sales.
President-elect Donald Trump has suggested eliminating the federal tax credit for electric vehicles, and some experts expect a drop in EV sales to follow.
The tax credits — $7,500 for new and $4,000 for used — were ushered in as part of President Joe Biden’s Inflation Reduction Act to address climate change by incentivizing electric car sales, although the first federal EV tax credit was introduced under President George W. Bush’s U.S. Energy Policy Act of 2005.
If Trump follows through with his proposed repeal, sales could decrease by up to 27% and leases on these types of cars could decrease by more than half, according to a group of economics professors who authored the study “The Effects of ‘Buy American’: Electric Vehicles and the Inflation Reduction Act,” which was published Nov. 25.
“We find that replacing the IRA EV credits with no credits or pre-IRA credits has complex market
and welfare effects,” wrote the authors, who include Joseph Shapiro of the University of California, Berkeley, Felix Tintelnot of Duke University and Hunt Allcott of Stanford University. “We also find that an IRA repeal pits trade versus the environment.”
A similar scenario occurred in Germany when the government removed a $4,900 EV subsidy. Sales in the 10 months after fell by 26.6%.
Top electric car brand Tesla could take a hit, but owner Elon Musk endorses Trump’s plan.
Musk, who Trump selected to head his inaugural Department of Government Efficiency, said in July that removing the tax credit would hurt his competitors more in the long run.
“In my view, we should end all government subsidies, including those for EVs, oil and gas,” Musk posted to X, the social media platform he owns, on Nov. 14.
California has its own plan for the tax credit, however. Gov. Gavin Newsom announced last week he would implement a statewide rebate if Trump follows through with his plan.
“We will intervene if the Trump Administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in a press release.
The governor said he would roll out a new version of the state’s Clean Vehicle Rebate Program, which was phased out last year and funded 594,000 cars.
“We’re not turning back on a clean transportation future,” Newsom said. “We’re going to make it more affordable for people to drive vehicles that don’t pollute.”
