The newest indication of uncertainty surrounding EVs for next year is California’s efforts to thwart any actions by President-elect Donald Trump to reduce subsidies, which some analysts advise potential buyers to consider now.
According to Jay Turner, a market researcher and professor of environmental studies at Wellesley College, the road ahead for EVs in 2025 appears to be somewhat rocky. Good news for Californians! He contacted California Governor Gavin Newsom to announce Monday that the state will cover the shortfall if the incoming administration eliminates the current federal EV tax credits.
According to Turner, several states, like as Colorado and Massachusetts, already provide significant assistance that EV purchasers can combine with federal assistance. However, should a Republican-controlled White House and Congress stifle that aid, California’s new ultimatum would essentially replace the tax credits (of $7,500 for new EVs and up to $4,000 for used ones) that the Biden administration introduced under the Inflation Reduction Act after its own incentives expired last year.
In a statement released on Monday, Democrat Newsom stated, “We’re not going back on a clean transportation future; we’re going to make it more affordable for people to drive vehicles that don’t pollute.”
Trump is certain to rekindle his dispute with California over strict pollution regulations, which he has criticized. On the campaign trail, he also stated that he would think about doing away with the EV subsidies, stating that tax credits and incentives are often not very beneficial.
The Trump transition team stated that he will be concentrating on halting attacks on gas-powered vehicles during his next term, although they did not provide detailed plans. In a statement, spokesperson Karoline Leavitt said that President Trump will help the auto industry by making room for both gas-powered and electric automobiles.
Although EV sales are still breaking records, the adoption rate this year has been lower than anticipated, which has caused many automakers to scale down their plans for the electric transition.
Meanwhile, the market has been supported by subsidies such as those offered under the IRA. Cox Automotive reports that October saw one million new EV sales so far this year, with incentives accounting for at least 13.7% of the average transaction price. Sales of used EVs have increased by 63.5% so far this year, which highlights another issue: manufacturers are still attempting to determine how many EVs to make in order to meet demand without going overboard, which has left some dealerships with an excess of clean-energy vehicles.
Ivan Drury, director of insights at Edmunds, stated that American automakers want the consumer incentives to remain essentially unaltered. However, there is now very little sign that Trump and Republican lawmakers want to abandon the IRA rebate program, according to industry experts.
We are aware that the likelihood of it disappearing is the most likely of the possibilities offered. How soon, how much, and what to do about it are the only questions. “Oh,” Drury said.
The answer could vary by prospective buyers locations and budgets, but anyone who s been eyeing an EV lately should consider acting soon, he said. Even without knowing what the Trump administration and Congress may do, manufacturers will likely produce fewer EVs next yearto better sync up with demand, Drury said, which would likely translate into fewer discounts.
And right now, it s model-year sell-down time, he noted. That means buyers can combine existing tax credits with the deep discounts on offer over the next three months. Drury estimated at least 4 out of 5 EVs on dealers lots right now are 2024 models.
If I were a buyer, I d move before the end of year, Turner said. Even if the credits aren t repealed by Congress, the Trump White House could sharply limit which EVs are eligible for the tax credit through administrative action, he said, such as tightening rules aroundforeign battery-sourcing.
One wild card in the next leg of the EV wars: tariffs, whichTrump threatened Mondayto increase on goods from China, Mexico and Canada on his first day in office, which would likely drive up car prices.
Another question mark surrounds Tesla. The company s centibillionaire CEO, Elon Musk, played an outsize role in Trump s re-election campaign and isslated to help runa new Department of Government Efficiency, a role thathas the potential to pose unparalleled conflicts of interest. Muskhas previously calledto take away the subsidies for EVs, saying, It will only help Tesla.The automaker s stock has soaredsince Trump s victory as investors bet on the company benefiting after he takes office.
Hours after Newsom announced his proposal Monday,Bloomberg News reportedthat his office planned to exclude Teslas from any state rebate program, citing an idea to limit the proposed aid based on automakers EV market shares. A governor’s office spokesperson told NBC News that Tesla and other automakers might be excluded under a potential market cap, depending on what the cap is. However, the spokesperson warned that the idea is subject to negotiation with the legislature and would be intended to foster market competition.
Drury said there s reason to believe Musk is right to envision his company faring comparatively well if the federal credit goes away.
It s going to hurt every automaker other than Tesla, he said. The tax credit is meant to utilize adoption, to help convince people this is the thing to do. While rivals areeating into Tesla s market share, the EV-only automaker still dominates the U.S. market, and the company doesn t need that with their customer base right there, Drury said of the incentive.
For those who might be more risk-averse, he suggests leasing an EV instead.
The current federal tax credit also applies to leases, and some dealerships areexploiting a loopholethat allows EV lessees to qualify for the full $7,500 credit without meeting income or manufacturer requirements. In many cases, dealers will apply those savings directly to the term of the lease, Drury said, effectively lowering customers monthly payments.
In a recent Edmunds analysis of mid-priced vehicles leased this year, the average monthly payment for EVs when factoring in tax credits was $428, far lower than the $572 for vehicles with gas engines. For a 36-month lease, that s more than $5,000 in average savings.
If the tax credit goes away and it s a significant amount that s being utilized by dealers, you ll have them rather upset for a while, Drury said. Some will say, Well, good, nobody was buying them. But you re not going to have more happy dealers.
Buyers who act before any such changes, however, may have reason to smile in retrospect.
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