The transition team of U.S. President-elect Donald Trump is reportedly planning to eliminate the up to $7,500 electric vehicle (EV) subsidy established under the Biden administration’s Inflation Reduction Act (IRA).
According to U.S. media reports, the energy policy team led by Harold Hamm, founder of oil and gas company Continental Resources, and North Dakota Governor Doug Burgum is discussing the repeal of the IRA’s tax credits. The team has reportedly held multiple meetings since Trump’s election victory, some at Trump’s residence in Mar-a-Lago, Florida. Tesla, the largest EV manufacturer in the U.S., has expressed support for repealing the subsidy in discussions with Trump’s transition team.
Elon Musk, Tesla’s CEO, stated during a conference call following the company’s earnings report in July that while repealing EV subsidies could slightly impact Tesla’s sales, it would be devastating for competitors and ultimately benefit Tesla in the long run.
During his campaign, Trump frequently criticized the IRA and vowed to end the Biden administration’s EV mandates. Although he has not specified which policies he plans to eliminate, Trump has emphasized the need to cut costs to extend tax reductions set to expire early in his term. Repealing EV tax credits would save significant funds needed to maintain tax cuts, potentially amounting to trillions of dollars.
Members of the energy policy team anticipate that Republicans will use budget reconciliation procedures to pass tax legislation in Congress without Democratic support. The Biden administration also used this budget reconciliation process to pass the IRA.
If the EV tax credit is repealed, the EV and battery industries, already struggling due to slowing sales, will likely face further setbacks.
The IRA provides tax credits of up to $7,500 per vehicle for EVs manufactured in the U.S. that meet strict sourcing requirements for batteries and critical minerals. However, due to stringent eligibility criteria, there are currently few vehicles that qualify for the full subsidy. Additionally, there is speculation that the commercial EV sector, which has benefited from subsidies, could also experience a downturn.
