On May 12, 2025, House Republicans introduced a tax reform bill that could reshape the U.S. electric vehicle (EV) landscape by proposing to eliminate the $7,500 new-vehicle tax credit and $4,000 used-vehicle credit, alongside repealing fuel efficiency rules aimed at boosting zero-emission vehicles. This move, set for discussion in the House Ways and Means Committee, has sparked concerns about stalling EV adoption and ceding ground to global competitors, reports Automotive News.

Proposed Cuts to EV Incentives

The bill targets the immediate repeal of EV tax credits, effective December 31, 2025, though it allows a one-year extension of the $7,500 credit for automakers yet to sell 200,000 EVs. In 2024, the U.S. Treasury distributed over $2 billion in point-of-sale EV rebates, underscoring the credits’ role in making EVs more affordable. Eliminating these incentives could raise EV purchase costs, potentially slowing consumer adoption, especially for middle-income buyers. Genevieve Cullen, president of the Electric Drive Transportation Association, called the plan “catastrophically short-sighted,” warning it would “deliver an enormous market advantage” to competitors like China while threatening U.S. jobs and manufacturing.

Battery Production Restrictions

While the proposal retains a battery production tax credit, it introduces a 2027 restriction barring credits for vehicles using components from certain Chinese companies or licensed Chinese technology. This could impact major U.S. automakers like Ford and Tesla, which rely on Chinese battery tech licenses. The restriction aims to bolster domestic supply chains but may raise production costs and limit battery availability, potentially delaying EV rollouts.

Loan Program Termination

The bill also seeks to end a loan program supporting advanced vehicle manufacturing, rescinding unobligated funds. Recent loans include $9.63 billion to a Ford-SK On joint venture for three battery plants in Tennessee and Kentucky, $7.54 billion to a Stellantis-Samsung venture for two Indiana plants, and $6.57 billion to Rivian for a Georgia factory set to produce affordable EVs by 2028. Canceling these funds could disrupt plans to scale U.S. EV and battery production, impacting thousands of jobs and regional economies.

Industry and Economic Impacts

The proposed changes arrive as EVs gain traction, with U.S. sales hitting 1.2 million in 2024, about 8% of new vehicle sales. Repealing tax credits and fuel economy standards could slow this growth, particularly for budget-conscious buyers, while favoring traditional gas-powered vehicles. The loss of loan programs may also hinder automakers’ ability to compete with China, where heavy subsidies drive EV dominance. Additionally, rescinding greenhouse gas emission rules for 2027 and beyond could weaken environmental progress, as EVs are critical to reducing transportation emissions, which account for 29% of U.S. greenhouse gases.

What’s Next for EV Owners and Manufacturers?

The bill faces a House Ways and Means Committee hearing on May 13, with the Energy and Commerce Committee addressing fuel economy and emissions rules. If passed, the changes could increase EV costs by up to $7,500 per vehicle, potentially pushing buyers toward gas-powered alternatives. Automakers may need to absorb losses or pivot to hybrid models to maintain sales. For EV enthusiasts and industry stakeholders, the proposal signals a critical juncture, balancing economic priorities against environmental and competitive goals.

Photos courtesy of Tesla