EV Makers Face Sales Challenges as Potential Repeal of $7,500 Federal Tax Credit Looms

Credit: Lucid

Lucid Motors, VinFast, Rivian, and other electric vehicle (EV) manufacturers may experience a sales decline if President-elect Donald Trump follows through on plans to overturn the $7,500 federal tax credit for EV purchases. The credit, a crucial incentive for EV adoption, has significantly boosted sales through a leasing loophole utilized by many automakers.

According to S&P Global Mobility, leasing has become a dominant strategy for some EV models to qualify for the tax credit. For example, leasing rates as of July 2024 showed 99.5% for the VinFast VF8, 91.4% for the Polestar 2, 90.4% for the Nissan Ariya, and 79.1% for the Volkswagen ID.4. These arrangements allow automakers to claim the tax credit directly, passing the savings to customers through low-payment lease deals. Across the industry, leasing levels have surged, benefiting legacy automakers and startups alike.

The potential repeal of the tax credit, however, could disrupt the EV market, particularly for brands heavily reliant on leasing to make their vehicles more affordable. S&P Global Mobility highlights that government policies at federal and state levels will continue to shape market dynamics, emphasizing the importance of competitive leasing strategies. To date, more than 300,000 EV buyers have utilized point-of-sale credits, amounting to over $2 billion in incentives.

While many automakers could face setbacks, Tesla CEO Elon Musk has suggested the company is less vulnerable to such policy changes. “Take a minute to read our public filings and you will see that EV incentives represent a minor part of our revenue,” Musk noted on X in September. He also contrasted EV incentives with what he described as “massive tax breaks” for oil and gas companies, arguing they far exceed support for the EV sector.

If implemented, the policy shift could challenge EV makersā€™ efforts to remain competitive in a rapidly evolving market while further complicating affordability for consumers.

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