The U.S. electric vehicle tax credit program will end on September 30 following new tax and budget legislation approved by Congress on Thursday.
The law removes the $7,500 tax credit for new EVs and the $4,000 credit for used EVs, both of which have supported electric vehicle sales in recent years.
The EV tax credit was first introduced in 2008 and originally phased out after automakers reached 200,000 vehicle sales. In 2022, the program was expanded to include leased vehicles and removed the per-manufacturer cap.
The new law is expected to affect short-term EV sales. Some buyers may move up their purchases to qualify before the credit expires, leading to a temporary increase in sales followed by a likely slowdown.
A recent study by Harvard University projected that ending the credits could lower EV adoption by 6 percent by 2030, while saving the government $169 billion over ten years.
While the EV incentives are ending, the final bill includes benefits for U.S. automakers. It eliminates penalties for failing to meet Corporate Average Fuel Economy standards, making it easier for manufacturers to continue producing gas-powered vehicles.
Last year, Stellantis paid $190.7 million in civil penalties for missing fuel economy targets in 2019 and 2020, after paying nearly $400 million from 2016 to 2019. General Motors paid $128.2 million in penalties for 2016 and 2017.
The law also dropped a proposed $250 annual EV fee intended to support road repairs and removed a requirement that the U.S. Postal Service sell off its electric delivery vehicles.
The Electrification Coalition, an electric vehicle advocacy group, criticized the legislation, saying it weakens the U.S. position in the global EV market and gives an advantage to China as EVs continue to grow worldwide.
