If the federal EV tax credit is eliminated by the Trump Administration, a recent study warns that it could have severe repercussions on U.S. manufacturing.
Conducted by the REPEAT Project, a research group at Princeton University focusing on environmental policy, the study revealed that abolishing the $7,500 tax credit would not only decrease the demand for EVs but also jeopardize manufacturing jobs associated with producing these vehicles and their batteries.
Jesse D. Jenkins, an assistant professor at Princeton and the project leader of the study, emphasized the significance of the report in highlighting the impact on U.S. manufacturing. In an email to Electrek, Jenkins stated, “The report is also the only analysis I’m aware of to date that draws the connection to U.S. manufacturing as well.”
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If the tax credit is discontinued, researchers estimate that EV sales in the U.S. could drop by 30% in 2027 and nearly 40% by 2030. This decline could reduce the projected EV market share from 18% to 13% in 2026 and from 40% to 24% in 2030, as outlined in the study.
This downturn might result in the cancellation of 100% of planned expansions of U.S. EV assembly plants and render 29% to 72% of U.S. battery-manufacturing capacity redundant, according to the study. The potential closure or non-establishment of factories would lead to a decrease in job opportunities. Furthermore, based on the current distribution of EV-related manufacturing projects, red states could face the greatest impact.
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Industry analysts consider the tax credit crucial for sustaining the growth of EV sales in the U.S. It was one of the key factors that led S&P Global Mobility to predict in 2023 that U.S. EV sales could more than double by 2030. However, the Trump Administration is anticipated to target the credit, similar to its actions against other Biden Administration policies related to charging infrastructure and emissions standards.
The possible elimination of the tax credit and other Trump policies prompted J.D. Power to adjust its EV market share retail forecast to remain steady this year at 9.1% of the U.S. retail market, with anticipated growth after this year to reach 26% of the market by 2030. Despite the expected market growth in mainstream models outside of EV-specific brands like Tesla, Rivian, and Lucid, this adjustment could still lead to a 3% increase in sales.