The Inflation Reduction Act (IRA) of 2022 included a suite of incentives to help speed the transition from polluting gasoline cars and trucks to cleaner electric vehicles (EVs). These incentives are helping manufacturers grow the capacity for domestic EV battery and vehicle production and also included tax credits to make the initial purchase of an EV more affordable. This provision is important because while EV drivers save money over the lifetime of the vehicle (due to lower fuel costs), the initial price of the vehicle can be higher than gasoline car. These tax credits let EV buyers breakeven on driving cost earlier, making driving more affordable, while also reducing pollution that cost us all in shortened lives and health expenses.
The current tax incentives provide a $7,500 tax credit for vehicles that meet the requirements laid out in the IRA. This credit can be taken on a personal tax return or more conveniently can be transferred to the dealer at the time of sale to reduce the upfront cost of the vehicle. The requirements to get the credit include a maximum sales price of $55,000 for EV cars and $80,000 for EV trucks and SUVs. There are also restrictions on the location of the battery and vehicle production, so that there currently are 21 EV models eligible for the credit as of June 2025.
The proposed change would revert on January 1, 2026, to the prior restriction of 200,000 per manufacturer, but also include the new restrictions on vehicle price and manufacturing location. All EV credits would end at the start of 2027. This would have the perverse effect of penalizing automakers that have led in EV manufacturing, including all of the 3 major traditional US carmakers (General Motors, Ford, and Stellantis). Since the Trump administration hasn’t made information accessible, we don’t have enough data about qualifying sales in 2023 and 2024, but based on reasonable assumptions, most vehicles currently eligible for the new vehicle tax credit would no longer qualify.
| Manufacturers that exceeded the 200,000 vehicle cap prior to 2023 | Manufacturers that likely have exceeded the 200,000 vehicle cap as of end of 2024 | Manufacturers likely to be eligible for proposed EV credit in 2026 |
| Ford (Ford, Lincoln) General Motors (Chevrolet, GMC, Cadillac, Buick) Tesla Toyota (Toyota, Lexus) | BMW Hyundai Group (Hyundai, Kia, Genesis) Nissan Stellantis (Chrysler, Dodge, FIAT, Jeep, Ram) Volkswagen Group (VW, Audi, Porsche) | Honda (Honda, Acura) Jaguar / Land Rover Lucid Mazda Mercedes Rivian Subaru Volvo/Geely (Volvo, Polestar) |
| Currently eligible EVs made by manufacturers ineligible for a consumer new EV credit under proposed changes | Currently eligible EVs made by manufacturers eligible for consumer new EV credit under proposed changes |
| Ford F-150 Lightning General Motors Cadillac Lyriq Cadillac Optiq Cadillac Vistiq Chevrolet Blazer EV Chevrolet Equinox EV Chevrolet Silverado EV GMC Sierra EV Hyundai Group Genesis GV70 Hyundai Ioniq 5 Hyundai Ioniq 9 Kia EV6 Kia EV9 Stellantis Chrysler Pacifica PHEV Jeep Wagoneer S Tesla Cybertruck Model 3 Model X Model Y | Honda Acura ZDX Honda Prologue |
The Honda handout?
Out of the current list of vehicles eligible for the federal tax credit, it is likely that only buyers of the Honda Prologue (and related Acura ZDX luxury model) would have access to the credit. Even more bizarre, the Honda Prologue is actually assembled by General Motors and is based on the Chevrolet Blazer EV. But buyers of the Blazer EV would not get the credit, only those purchasing the Honda-badged version would.
Notably, Honda has been slow to embrace battery electric vehicles. The Prologue is Honda’s first mass market EV. And this month Honda announced it would be further lowering its EV sales goals. In fact, the only reason why it would still qualify for the federal EV tax credit in 2026 is because the company hasn’t yet sold 200,000 qualifying electric vehicles—which raises the question of whether the proposed tax credit changes unfairly reward industry laggards. InfluenceMap, which tracks industry lobbying, gave Honda a D+ grade in its assessment of the automaker’s corporate engagement on climate policy.
While the Prologue is assembled in Mexico, Honda has been building out a domestic manufacturing footprint including several facilities in Ohio. It may not be a coincidence that Honda received this carve out as it is building a joint venture EV battery plant in Rep. Mike Carey’s (OH-15) district. Notably, Rep. Carey sits on the powerful House Ways and Means Committee, which penned the changes to the tax credit.
Rivian gets a short runway
The proposed changes to the EV tax credit limiting it to manufacturers that have sold less than 200,000 qualifying electric vehicles effectively limits it to 1) traditional automakers who have been slow to embrace electrification, and 2) new EV manufacturers.
Rivian is a new manufacturer that only makes fully electric vehicles. It started producing electric pickup trucks, delivery vans and SUVs a few years ago, but by the end of 2024 it had almost 90,000 electric passenger vehicles – nearly rivaling the sales of Honda EVs.
Rivian’s current offerings are not currently eligible for the EV tax credit, but the 2026 R2 SUV model is expected to meet eligibility requirements. But even if it does meet the requirements, the credit would go away completely in 2027, giving Rivian a very short window to offer the incentive to buyers. Rivian may have had a champion on the House Ways and Means Committee as Rep. Darin LaHood’s (IL-16) district includes Rivian’s manufacturing base in Normal, IL.
Winners: Oil industry
- During his candidacy, President Trump famously asked the oil industry to open up its wallets, and in return he would get rid of the EV tax credit once elected. Republican leaders are drafting this reconciliation bill to carry out Trump’s vision. The oil industry is getting exactly what they wanted. The EV tax credit is functionally dead.
Losers: Domestic investments, clean air, and consumer choice
- EV leaders like Tesla, Ford, and General Motors lose out
- Automakers that have moved investments or are in the process of doing so in response to the 30D tax credit requirements lose out. It takes time to bring things onshore, and canceling the credit just as these investments are getting going is NOT the right way to create a stable supply chain.
- EV deployment could be slowed, increasing air pollution and climate changing emissions.
- Drivers interested in switching to electric with the help of the EV tax credit will have extremely limited choices, and only for 2026.
Effectively, this is a complete repeal of the EV tax credit, with currently an exception for one Japanese automaker for one year. There’s simply no rational basis for this policy change. China and the European Union are already ahead of the US in EV manufacturing and sales, and US automakers could fall irretrievably behind if they don’t accelerate their development and manufacturing of EVs. Getting rid of the EV incentives is a bad policy choice that will hurt both drivers and our economy. And this action is only one of the harmful, anti-science changes in the reconciliation bill. Your voice is important and you can reach out to Congress now using our action tool.