Republican Speaker of the House Mike Johnson, who also goes by MAGA Mike Johnson, recently told Bloomberg he would seek to eliminate the federal tax credit for electric vehicles. “I think there is a better chance we kill it than save it. But we’ll see how it comes out,” Johnson said. Your Model Y might get more expensive next year.
The federal tax credit is currently available for EVs and plug-in hybrids built in North America that also fall within parameters for parts/battery content and price. Some vehicles qualify for the full $7,500, while others only receive a partial credit. Leased vehicles can also claim the credit even if they aren’t built in North America, and there is a used credit of $4,000 for qualifying vehicles under $25,000.
- Base Trim Transmission
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Automatic
- Base Trim Drivetrain
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All-Wheel Drive
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425 HP
Johnson said he would reveal more details about dropping the energy credits later this week, but he does not seem to have full support from his party. 38 House Republicans have expressed support for keeping these credits, which were part of the bipartisan Inflation Reduction Act passed under the Biden Administration. Revoking the tax credit has wide ramifications, not just for car buyers, but also for EV and battery factories under construction or already built in Republican states and districts.
CarBuzz, its writers, editors, and owners have no affiliation with any political entity or party. The CarBuzz team comprises members with a variety of differing political and social views. This article does not support either side of the current political landscape and serves only to collate the various developments therein to discuss their potential ramifications on the auto industry.
Cutting Costs Is The Reason
The $7,500 credit was implemented as an incentive to make EVs more affordable at a time when going electric was more expensive than an equivalent gas-powered car. While the price difference between gas and electric cars has shrunk, some argue there is still a need for the credit. EV sales totaled 1,301,411 in 2024, a 7.3% increase compared to 2023, accounting for 8.1% of the total car market. The rate of growth has slowed, but EV sales are still increasing year-over-year.
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It appears the incentives are still effective, but Johnson and his party need to cut costs in order to pay for the House budget resolution, which calls for $4.5 trillion in tax cuts from 2025 to 2034. In case you were wondering how much EV credits cost the taxpayer, consulting firm Capital Alpha Partners says it will total more than $200 billion in 10 years. That’s roughly 4.5% of the savings needed to pay for the tax cuts.
EVs May Get More Expensive
It’s unlikely that the government will repeal the tax credits overnight, though it could happen sooner than you might expect. The credits could be cut as soon as next year, starting on January 1, 2026. If the incentives are taken away, it will be more expensive to buy an electric car, including the best-selling EV in the world, the Tesla Model Y. That doesn’t even factor in the additional cost of the tariffs imposed by the Trump Administration.
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Tesla CEO Elon Musk has been outspoken about repealing the tax credits. “End all government subsidies, including those for EVs, oil and gas,” he said in a tweet. Though the company sells many vehicles that qualify for the credit, in one way, Tesla stands to benefit the most because it has already gained a market advantage when it was the only automaker to claim the subsidies en masse.
Source: Bloomberg
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