President Donald Trump‘s One Big Beautiful Bill Act has cast a shadow over the electric vehicle industry, as it is expected to slow the market’s shift from traditional gasoline-powered cars.
The Republican megabill, which implements the president’s spending and tax agenda, cuts hundreds of billions of dollars for clean energy tax credits that the Biden administration enacted through the 2022 Inflation Reduction Act, touted by Democrats at the time as the biggest climate bill ever.
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One of the most important green subsidies is a $7,500 consumer tax credit for new electric vehicles and a credit of up to $4,000 for used electric cars. These tax credits were intended to encourage consumers to buy electric or hybrid vehicles. Now, though, they will expire by the end of September.
Trump and Republicans have touted the provision, along with the administration’s efforts to roll back regulations that favor EVs, as a boon to automakers and autoworkers. They have argued that subsidies for EVs and rules that penalize gas cars raise prices and limit consumer choices.
Experts in the automotive space say the looming expiration of tax credits may motivate consumers to visit local dealerships before the deadline, but the long-term effects could be more significant, including a drop in sales and making U.S. electric vehicle manufacturers less globally competitive.
“When it comes to electric vehicles, it is hard to find any market in the world that did not take off without the help of incentives,” Michael Dunne, the CEO of Dunne Insights, a global EV advisory firm, told the Washington Examiner. “Whether you are talking about China, California, or Europe, incentives go hand in hand with EV demand and without them, there would be no Tesla today.”
The bill could have long-term effects for the industry, Dunne warned, adding that “it really puts us behind the game as the rest of the world moves to electrics, we’re standing still.”
A long-term hit to sales
The tax credits have driven EV sales in the U.S., with 50% of EVs sold in the U.S. over the last three years eligible for the consumer tax credit in 2025, United Kingdom-based firm Rho Motion found.
Analysts adjusted their projections for the rest of the year before the bill was even signed, confident that the prospective cuts and existing tariffs would put downward pressure on the market.
This year, Rho Motion dropped its U.S. EV sales outlook by 42% for period of 2025 to 2030.
Will Roberts, a senior research analyst with Rho Motion, told the Washington Examiner that the next development to watch is how many consumers try to take advantage of credits before they end, and rush to purchase an EV before the end of September.
Traditional automakers may not experience a significant loss in sales, as they can adjust their manufacturing to focus on hybrids or gasoline-powered cars. But companies like Tesla, Rivian, and Lucid, whose businesses are entirely reliant on EVs, might see some form of sales drop.
Tesla has already experienced some setbacks in sales this year. Last week, it announced that it delivered 384,122 electric vehicles during the second quarter, a decrease from the 444,000 electric cars delivered in Q2 last year.
In the second quarter, Rivian sales dropped 23%. Lucid reported a 38% increase in sales, but missed Wall Street expectations.
Still, others like General Motors have seen immense growth, reporting a more than 100% increase in sales earlier this month when compared to levels from last year. GM has become the industry’s second-largest electric vehicle seller, with more than 62,000 EVs sold in the U.S. year to date through May.
EV manufacturers losing credits
It is to be determined how the absence of the credits will affect major EV manufacturers like Tesla, Rivian, and Lucid, as not all of their models are eligible for the existing subsidies due to price caps and limitations on cars made with foreign components.
Loren McDonald, chief analyst at the analytics firm Paren, said that among the three electric vehicle companies, Lucid is likely to be the least affected, as most of its models have long been too expensive to qualify for the subsidies in the first place.
He noted that Rivian could be “affected slightly,” but the company’s R1T and R1S cars cost close to or more than the $80,000 retail price cap. Rivian sales are also expected to increase with the arrival of its R2 vehicle, which is anticipated to start at around $45,000 to $50,000.
“Tesla, however, will likely see the biggest negative impact of these three on the Model Y and Model 3,” McDonald said. He added, though, that Tesla has control over its consumer pricing and has made aggressive price adjustments in the past.
Only Tesla’s Model 3 and Model Y currently qualify for the consumer vehicle tax credit, while all of their passenger vehicles qualify for the commercial vehicle credit. Similarly, only Rivian’s R1S and R1T models qualify for the commercial vehicle subsidy.
Tesla CEO Elon Musk has argued that losing the tax credits could provide the company with an edge against competitors who are further behind in developing EV product lines. “Take away the subsidies. It will only help Tesla,” Musk wrote in a post on X last year.
Other notable EVs that are currently eligible for the tax credits include the Ford F-150 Lightning, Chevrolet Equinox, Cadillac Lyriq, Acura ZDX, Honda Prologue, as well as the Kia EV6 and Kia EV9.
Wave of new sales
The Sept. 30 deadline for the tax credits may motivate some buyers to expedite their plans to purchase, said McDonald.
While it may boost sales somewhat, it won’t be “off the charts,” he said. “Predicting consumer behavior is challenging,” but a key factor will be how effectively the automakers and dealers market this deadline.
Dunne, a former General Motors executive, said he expects automakers to push for more EV sales these next few months.
He said every month an auto company would tell salesmen “this month is the single most important month” of their career, adding “This is no different, except that in this case, we know there’s a deadline for when that money goes away.”
To avoid an sharp decline this fall, some manufacturers may be inclined to offer short-term incentives to keep consistent numbers.
“Often, where we’ve seen tax credits removed in other markets, sometimes the OEM [original equipment manufacturer] tries to step in and take some of that impact for the consumer to at least kind of smooth the transition between having a tax credit available or having a subsidy available and then not,” Roberts said.
He explained that this could very well result in list prices going down in the short term. He warned, however, that it is unlikely manufacturers will move to take on the full $7,500 hit once the credits expire.
Investment and job losses
As of June, the EV industry has seen at least $61.9 billion in announced investment, and 91,900 jobs have been directly linked to facilities that currently or intend to manufacture credit-eligible vehicles or batteries, according to Atlas EV Hub data.
Analysts have said the phasing out of these credits could lead to delays at these facilities, potentially leading to layoffs.
For example, automakers like General Motors in Detroit have been preparing to ramp up production of electric cars in the next few years, but now are reversing their plans.
“Whenever you have plants delayed, layoffs soon follow,” Dunne told the Washington Examiner, unless the car plant pivots to producing gasoline cars.
Ingrid Malmgren, senior policy director at Plug-In America, a non-profit organization that promotes plug-in vehicles, agreed with the sentiment that there will “absolutely” be some job loss.
“We’ve already seen some factories and planned investments that have been canceled due to a lack of consistency and the just not having the certainty,” Malmgren told the Washington Examiner. “So not having that demand that these tax credits generate is going to really put a dent in [jobs].”
Some of the legacy manufacturers have announced that they’re going to retool factories to make gas cars, which is really “disappointing,” Malmgren said.
Ceding to China
Experts also warned that the removal of the tax credits could slow down the domestication of supply chains for critical EV components, such as batteries.
By eliminating the credit, Roberts said, the U.S. is taking the issue out of manufacturers’ hands, reducing the incentive for them to reduce reliance on China.
For years, auto manufacturers in the U.S. have been struggling to compete with Chinese EV manufacturers, which offer lower-cost and technologically advanced options.
While the administration has emphasized the importance of bringing supply chains to U.S. shores, several Democrats have accused Republicans of doing the opposite in the passed legislation.
“While China is manipulating its currency, subsidizing the cost of manufacturing, and using slave labor to dominate global supply chains, eliminating these tax credits will stifle innovation and progress, and put us at a disadvantage,” Rep. Debbie Dingell (D-MI) said in a statement. “We must compete in the global marketplace to keep our domestic auto industry strong, and the global marketplace wants electric vehicles.”
“We’re not competing on a level playing field with our adversaries. We cannot take steps backward and we must not cede our global leadership to China or any other country,” Dingell added.
The White House defended the reversal of these tax credits in a statement to the Washington Examiner, with assistant press secretary Taylor Rogers emphasizing that the bill reversed the so-called “EV mandate”.
The Trump administration has reversed policies implemented during the Biden administration to boost the EV industry. For instance, the Environmental Protection Agency is reconsidering greenhouse gas regulation standards for light-duty, medium-duty, and heavy-duty vehicles. Trump has also signed legislation to prevent California from implementing vehicle emission rules that would eventually ban gas cars.
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“As the President has repeatedly said, Americans should be able to buy whatever type of car they want—and now they can,” Rogers said. “Not only does the One Big Beautiful Bill eliminate ridiculous EV mandates but it delivers a Made in America Auto loan deduction, and unleashes American energy—driving down prices at the pump.
Rogers added, “The Trump Administration is delivering common-sense policies that lower cost, incentivize Made in America, and protect our energy independence from foreign competitors.”