As the Trump administration prepares to assume office, the U.S. auto industry faces potential upheaval, with speculation mounting that the $7,500 federal tax credit for electric vehicles (EVs) could be rescinded. Industry leaders warn that such a move could have significant repercussions for the domestic EV market, hindering progress in electrification and green technology adoption.
John Bozzella, CEO of the Alliance for Automotive Innovation, which represents nearly all major automakers except Tesla, has already reached out to the incoming administration. Speaking to The Detroit News during the Detroit Auto Show, Bozzella emphasized the need for the new administration to recognize the critical role the automotive industry plays in economic and national security. “We need to make a compelling argument about how important a competitive industry is,” he said.
The potential elimination of EV tax credits comes at a critical time for U.S. automakers, who are racing to catch up with global competitors in EV development. Bozzella noted that the U.S. lags 10 to 15 years behind China in EV production capabilities. Under the Biden administration, significant investments, including over $100 billion through the Inflation Reduction Act (IRA), had been directed toward building a robust domestic EV battery supply chain. These funds were instrumental in transforming Midwest factories for EV production and encouraging manufacturers to invest in cutting-edge technology.
Ford CEO Jim Farley highlighted the importance of such subsidies, including the $35-per-kilowatt-hour production credit. “The production credit is essential for our industry,” Farley said. “Without it, many of the EV plants in the Midwest would not have been built in the U.S.”
Mike Stanton, president of the National Automobile Dealers Association (NADA), urged the new administration to consider a phased approach if the tax credits are eliminated. “We’ve got billions of dollars’ worth of inventory, and if the credits disappear overnight, EVs could become $7,500 more expensive to sell,” Stanton told The Detroit News. He called for a gradual transition to avoid disruptions for manufacturers, dealers, and consumers.
The auto industry’s ability to navigate these potential policy changes will likely shape its future trajectory, particularly as global competition in EV technology intensifies. For automakers and dealers, the stakes have never been higher in ensuring that the U.S. remains competitive in the fast-evolving automotive landscape.