The incoming Trump administration will prioritize eliminating the $7,500 federal EV tax credit, a move that has the support of Tesla, Reuters reported Thursday.
Nixing the EV tax credit is being discussed by Trump’s transition team as part of broader tax legislation, according to the report, which cited two anonymous sourced familiar with the matter. The transition team views the eliminating the EV tax credit as an easy target that would get easy approval from the Republican-controlled Congress, the report said, while noting that the administration needs cost savings in order to pay for trillions of dollars in tax cuts set to expire early in Trump’s term.
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The two sources also told Reuters that representatives of Tesla have told a Trump-transition committee that they support ending the tax credit. Tesla is the largest U.S. EV brand, but the automaker is likely making a bet that ending the tax credit will have a bigger effect on competitors less established in the EV market. It also keeps Tesla CEO Elon Musk—an enthusiastic supporter of Trump—on the same page as the President-elect.
Under the Biden administration, the EV tax credit was revamped under the Inflation Reduction Act (IRA) of 2022. It became an instant dealership rebate at the beginning of 2024, but also added more restrictions on which vehicles qualify. Those related to the origin of battery components and critical minerals, in addition to requirements for North American assembly and price and income caps that were phased in previously.
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Considering those sourcing sourcing requirements, the purchase credit depends on paperwork and manufacturing nuance, too. That’s led to some U.S.-made models, like the Nissan Leaf, flowing in and out of qualification.
The most maligned piece of the tax credit may be the so-called “leasing loophole,” which applies $7,500 toward leased EVs no matter where they’re made or the sticker price. Democrats reportedly haven’t touched it in the present session of Congress for risk of sending all the credits back for a vote.