The U.S. Senate is thinking of scrapping federal electric vehicle incentives much earlier than the Trump administration had originally planned. First put in place by the Biden administration, these federal EV incentives have been critical to boosting electric vehicle sales in the country. Similar incentives have also been key to boosting electric vehicle adoption in other major markets like China and the European Union.
Like most of the climate action-related policies instituted by the previous administration, federal EV incentives were targeted by the current right-wing administration and were first included in a measure that would have steadily reduced the incentives before finally eliminating them over next year. However, the Senate passed a tax and spending package that could get rid of federal electric vehicle tax credits much sooner than the House version of the bill set out to.
While the House version of the massive tax and spending bill would have phased out federal EV tax incentives through the year into 2026, the Senate bill will get rid of the incentives in just 3 months on September 30th. Given the role these incentives played in boosting electric vehicle sales in the U.S. market, scrapping them will undoubtedly have major consequences on the country’s auto industry.
The average electric car is significantly more expensive than a similar diesel or gasoline-powered car, especially in the U.S. where automakers still haven’t figured out how to manufacture electric cars at low cost. As a result, a large portion of the country’s electric vehicle sales were largely driven by higher-earning individuals who make up a minority of America’s car market, while federal tax incentives enabled less affluent drivers to adopt electric mobility as well.
The loss of these federal tax incentives will reverberate across the American vehicle market, significantly impacting its ability to absorb new electric cars and slowing down America’s transition to zero-emission battery electric vehicles (BEVs). With the U.S. already lagging behind China and Europe in electric vehicle adoption, eliminating federal tax incentives risks widening the gap between America and other major electric vehicle markets.
The GOP’s spending bill, at least the Senate version, still has been finalized and may be subject to various amendments before it is approved by the House. Lawmakers would have to reconcile both versions of the bill when the Senate version is sent to the House. Zero Emission Transportation Association executive director Albert Gore III says the Senate bill would be abandoning the goal of making the U.S. a top player in the global production of minerals, EV batteries, and electric cars.
Without bold and consistent federal support, America may lose its competitive edge in the global EV race. The consequences could extend far beyond the auto sector and into the broader clean energy economy.
The U.S. auto industry, including entities like Mullen Automotive Inc. (NASDAQ: MULN), will be following Congressional discussions to see how any decisions made and included in the spending bill could impact the trajectory of the EV industry in the country.
NOTE TO INVESTORS: The latest news and updates relating to Mullen Automotive Inc. (NASDAQ: MULN) are available in the company’s newsroom at https://ibn.fm/MULN
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