The Trump Administration has signaled that it could eliminate the $7,500 federal electric vehicle tax credit that was renewed under the Inflation Reduction Act (IRA). That could not only raise the effective prices of many EVs for consumers, but also impact manufacturing jobs, according to a new study.
The study comes from the REPEAT Project, a Princeton University program that conducts analysis of environmental policy. While not all EVs currently sold in the U.S. qualify for the credit, getting rid of it would still lead to a decline in sales, which in turn would impact the health of U.S. manufacturing, analysts found.
“The report is also the only analysis I’m aware of to date that draws the connection to U.S. manufacturing as well,” Jesse D. Jenkins, assistant professor at Princeton and project leader of the study, told Electrek in an emailed statement.
Without the tax credit, EV sales could decrease 30% by 2027 and nearly 40% by 2030, according to the study, which also predicts declines in predicted EV market share from 18% to 13% in 2027 and from 40% to 24% in 2030.
This decrease in EV demand could lead to 100% of planned expansions of assembly plants for EV production being shuttered or canceled, analysts predict. And 29% to 72% of current battery-manufacturing capacity could become redundant this year.
Trump can’t actually eliminate the EV tax credit; it would take a coordinated repeal by Congress. In its current form, the tax credit already includes restrictions like price caps, a cap on income for qualifying EV purchasers, and stipulations on where vehicles are assembled and where their battery materials are sourced from. But for the vehicles that do qualify, the tax credit can make a big difference in the price consumers pay to drive one out of a showroom.