Car manufacturers are gearing up for the potential discontinuation of federal government electric vehicle tax incentives. They are urging for a gradual phaseout rather than an abrupt halt, as reported by Bloomberg on Tuesday.
Ford, General Motors, and industry lobbying groups have been pushing the Trump Administration and Republican Congressional lawmakers to retain some EV incentives from the Biden Administration’s Inflation Reduction Act (IRA) for as long as possible. This information comes from sources familiar with the matter who chose to remain anonymous.
The IRA was expected to double EV sales by 2030 compared to previous projections, thanks to its manufacturing incentives and tax credits. However, the Trump Administration has been vocal about its intention to prioritize the elimination of the federal EV tax credit, with the support of Elon Musk and Tesla.
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In case the federal EV tax credit is terminated, discussions are underway about implementing a three-year credit sunset. This approach would allow more time to lower the costs of new EVs and soften the impact of losing the tax credit.
Automakers are also advocating to retain the leasing loophole that enables companies with captive financing to receive a $7,500 tax credit for leased vehicles, passing on the savings to customers. This loophole provides an equivalent discount on EVs that might not qualify for the credit based on price, battery materials, or the customer’s income.
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The availability of EV leasing has surged in recent years, with federal funds subsidizing luxury EVs manufactured overseas. This argument may not hold weight in Congress, especially since the IRA’s EV tax credit barely passed initially.
Even if automakers do not succeed in persuading Republicans to maintain the federal EV tax credit, increased state incentives could help offset the loss. California, for instance, plans to offer $7,500 rebates to residents if the tax credit is eliminated, although it aims to exclude Tesla to promote competition among brands with lower market share.