President Donald Trump’s Big Beautiful Bill will put a definitive end to federal tax incentives for electric vehicle buyers. In its quest to undo most of the Biden administration’s climate action-related policies, the Trump administration initially laid out a timeline for phasing out EV tax credits through 2025. However, the recently passed Big Beautiful Bill will effectively end the federal EV incentive on September 30th.
According to the huge tax and spending cut measure, American drivers interested in purchasing an electric car will have three more months to subsidize the EV purchase using the $7,500 tax incentive. In a market where the average electric car is notably more expensive than a similar petrol or diesel-powered vehicle, this incentive has been critical to encouraging electric vehicle adoption.
The incentive enabled drivers who couldn’t afford the premium it costs to buy an electric car in the U.S. to ditch their greenhouse gas-emitting vehicles for zero-emission EVs, accelerating America’s transition to electric mobility and bringing it closer to reducing emissions in the transportation sector. The loss of the federal EV incentive will undoubtedly slow down electric vehicle adoption in the country and make it harder for the U.S. to catch up to Europe and China in EV adoption.
One of the main reasons why American EV adoption has proceeded at a glacial pace is the high cost of purchasing an EV. Kelley Blue Book data shows that, on average, a new electric car in the U.S. market is around $9,000 more expensive than a comparable new internal combustion engine (ICE) vehicle. Furthermore, opting for a used electric car will cost you $2,000 more than a second-hand gas-powered car.
The federal EV tax incentive typically provided up to $7,500 for new EVs and $4,000 for second-hand electric cars with the goal of making electric vehicle ownership more affordable to the average drivers who make up most of America’s vehicle market. Without these incentives, EV ownership would be limited to wealthy individuals with much more disposable income than the average American, and the country would have a much harder time reducing transportation emissions.
However, some experts say that drivers still have reason to buy electric cars even without the federal tax break. Although electric vehicles are more expensive to purchase, they typically have lower maintenance and ‘refueling’ costs compared to ICE vehicles. Plug In America Director Ingrid Malmgren says electric mobility is still a good financial decision thanks to the lifetime maintenance and fuel savings EV drivers will enjoy.
On average, an electric vehicle driver will save $7,700 in fueling costs over a decade and a half if they use both private and public chargers to recharge their vehicle. The amount of savings will, of course, vary based on factors such as location, the make of electric car, and where and when drivers charge their EVs.
Entities like Massimo Group (NASDAQ: MAMO) are likely to study how the changes in federal policy could reshape market dynamics within the auto industry.
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