An important tax credit that gives buyers of electric cars up to $7,500 may soon be coming to an end. One forecasting company is giving an estimate of when it might end.
If Republicans take over Washington, they probably won’t get rid of the whole Inflation Reduction Act of 2022, but they will likely go after the EV tax credit and related IRA provisions next year, says James Lucier, an analyst and founding partner at Capital Alpha Partners, a firm that does policy research and political forecasting.
“Most people think that the EV tax credits are the most at risk.” Lucier wrote in a note released Monday, “That is probably right.” He was thinking about how President-elect Trump and a Congress controlled by Republicans might lower the cost of their upcoming tax plan.
It is believed that Trump and his fellow Republicans will use a budget process called “reconciliation” to deal with the end of the tax cuts they got in 2017 and other tax policy issues. He said that he was looking forward to “a brutal budget exercise that starts with a fiscal target and works backwards from there.”
“That goal will be set by Congress in December or January.” The next step will be a budget measure in February or March. “We think that the specifics of next year’s budget-reconciliation bill won’t be decided until April or May,” the Capital Alpha analyst wrote.
He also said that any changes to the IRA’s tax credits would probably be “prospective and phased in.” “We believe that any changes will not go into effect until at least January 1, 2026.”
On November 14, shares in Rivian Automotive Inc. (RIVN 0.08%) and Tesla Inc. (TSLA 3.69%) fell sharply after a story said that the new Trump administration would get rid of the EV tax credit as part of its big tax plan. For months, most people have thought that credit would be taken away if the Republicans won all three seats in November.
On November 12, an EY expert said that Republicans would probably kill the credit by pushing up the date when it is no longer available. The credit is valid until 2032 because of the Inflation Reduction Act.
Tesla CEO Elon Musk, a big supporter and funder of Trump’s, has said he doesn’t mind if the $7,500 credit goes away. On November 14, he said on social media that the U.S. “should end all government subsidies, including those for EVs, oil and gas.” During an earnings call at the end of July, the billionaire businessman said that getting rid of the credit “would be devastating for our competitors and would hurt Tesla slightly.”
People who work for companies like Ford Motor Co. F 0.27%, General Motors Co. GM 0.16%, and Stellantis N.V. STLA 3.21% have been getting tax breaks. In a letter dated November 12, a lobbying group for the “Big Three” and other automakers asked Trump to “preserve auto-related provisions in the current tax code.” This would include the $7,500 EV tax credit.
A representative from Edmunds told BourseWatch that people “who were planning to take advantage of EV tax credits and lower costs might consider moving up their purchases a bit sooner.”
