Trump’s “Big Beautiful Bill” Overhauls EV Incentives and ZEV Credits: Impacts for Owners and Industry

President Trump’s “Big Beautiful Bill,” slated for signing in the coming days, delivers a seismic shift to electric vehicle (EV) incentives, Zero-Emission Vehicle (ZEV) credit systems, and clean energy policies. This legislation, detailed by EV industry analyst Sawyer Merritt, reshapes the landscape for EV owners, automakers, and enthusiasts, balancing new opportunities with significant challenges.

EV Tax Credits Face a Hard Deadline

The bill terminates the $7,500 federal tax credit for new EVs and the $4,000 credit for used EVs on September 30, 2025. These credits have been pivotal in making vehicles like the Tesla Model Y or Nissan Leaf more affordable, often reducing upfront costs by thousands. For perspective, the $7,500 credit could cover roughly 10% of a $75,000 Rivian R1S or nearly 20% of a $40,000 Chevrolet Bolt. After September 2025, buyers will bear the full cost, potentially slowing EV adoption, especially among middle-income households. Notably, earlier concerns about a $250 annual EV fee are dispelled, as the bill contains no such provision, offering relief to current and prospective owners.

ZEV Credit Market on the Brink

The ZEV credit system, a financial lifeline for EV manufacturers like Tesla, faces a near-total collapse under the new law. Previously, automakers failing to meet federal Corporate Average Fuel Economy (CAFE) standards faced hefty fines, incentivizing them to buy ZEV credits from companies producing EVs. The bill eliminates these penalties, reducing fines to $0, which Sawyer Merritt notes “removes a major incentive to purchase credits.”

Compounding this, Congress recently used the Congressional Review Act to revoke EPA waivers that allowed California and 17 other states to enforce stricter emissions rules, including ZEV mandates. “Without these waivers, states can no longer require automakers to meet ZEV sales targets or buy ZEV credits to comply,” Merritt explains. These waivers underpinned state-level ZEV programs, creating a robust market where Tesla earned billions by selling credits to legacy automakers like Ford or GM. With both federal and state compliance pressures gone, demand for ZEV credits in the U.S. is likely to plummet, though Tesla can still generate credits in markets like Europe. Legal battles to restore the waivers are expected, but their outcome remains uncertain.

Battery Manufacturing Credits: A Mixed Bag

The bill preserves the 45X Advanced Manufacturing Production Credit, providing $35 per kilowatt-hour for battery cells and $10 per kilowatt-hour for modules. This supports domestic production at facilities like Tesla’s Giga Nevada (in partnership with Panasonic), Giga Texas, and the new Nevada LFP battery plant. For example, a 100 kWh battery pack could yield a $4,500 credit ($3,500 for cells + $1,000 for modules), bolstering U.S. manufacturing. However, new sourcing restrictions complicate eligibility. Batteries must contain 60% U.S. content in 2026, increasing to 85% by 2030. Merritt cautions, “If the plant uses CATL equipment, it will be tough,” highlighting challenges for facilities reliant on Chinese technology. The U.S. Treasury is expected to issue guidance clarifying these requirements, which could ease compliance concerns for manufacturers.

New Deduction for U.S.-Made Vehicles

A novel tax deduction allows buyers of American-assembled vehicles to deduct up to $10,000 annually in loan interest from 2025 to 2028. Eligible vehicles, including EVs, must have final assembly in the U.S., a gross vehicle weight under 14,000 pounds (6,350 kilograms), and be cars, SUVs, pickups, minivans, vans, or motorcycles. Models like the Ford F-150 Lightning or Lucid Air qualify, but the deduction phases out for single filers earning over $100,000 or joint filers above $200,000. For a $50,000 loan at 5% interest, this could save buyers roughly $2,500 annually, making U.S.-built EVs more attractive despite the loss of tax credits.

Broader Clean Energy Rollbacks

Beyond EVs, the bill curtails clean energy incentives, impacting the broader transition to sustainable technologies. The 30% tax credit for rooftop solar ends December 31, 2025, potentially increasing installation costs by thousands (e.g., a $20,000 solar system loses $6,000 in savings). Tax credits for geothermal heat pumps, energy-efficient home improvements, and new energy-efficient homes also expire by mid-2026. The Alternative Fuel Vehicle Refueling Property Credit, which supports EV charging infrastructure, ends June 30, 2026, potentially slowing the expansion of public charging networks. For instance, installing a Level 2 charger (costing $500–$2,000) will lose up to 30% in federal support.

The bill also phases out clean electricity production and investment credits for wind and solar projects entering service after 2027, a blow to renewable energy. Projects must begin construction within a year of enactment or come online by 2027 to qualify. New restrictions disqualify facilities using components from China, complicating supply chains. Nuclear, geothermal, and battery storage projects have more time, but the overall reduction in clean energy support could hinder U.S. progress toward carbon neutrality.

Implications for EV Owners and Industry

For EV owners, the loss of tax credits increases purchase costs, potentially making gas-powered vehicles more competitive in the short term. A Tesla Model 3 Long Range, priced around $47,000, loses $7,500 in savings post-2025, pushing the effective cost to $54,500. This could deter budget-conscious buyers, slowing EV market growth. However, the loan interest deduction and retained battery manufacturing credits offer some relief, particularly for those buying U.S.-built models.

For automakers, the collapse of the ZEV credit market disrupts revenue streams, especially for Tesla, which reported $1.79 billion in regulatory credit revenue in 2024. Companies may scale back EV production if demand weakens, focusing instead on hybrids or internal combustion engine vehicles. The battery credit’s domestic sourcing rules incentivize U.S. manufacturing but risk supply chain bottlenecks if foreign components are phased out too quickly. Regulatory uncertainty, particularly around ZEV mandate litigation, complicates long-term planning.

Economically, the bill aligns with domestic manufacturing goals, potentially creating jobs in battery and vehicle production. However, reduced clean energy incentives could cede ground to countries like China, which dominates global EV and solar markets. Operationally, EV owners may face challenges if charging infrastructure growth slows due to the loss of refueling credits, particularly in rural areas where stations are sparse.

Looking Ahead: Navigating a New Era

EV owners and enthusiasts must act swiftly to leverage remaining incentives. Those planning to buy should aim for purchases before September 2025 to secure tax credits. Businesses leasing EVs lose their commercial clean vehicle credit on the same date, potentially raising lease costs. The shift toward U.S.-centric policies offers opportunities for domestic manufacturers but risks stalling the broader EV ecosystem. Upcoming Treasury guidance on battery credits and court rulings on ZEV mandates will be critical in shaping the industry’s path.

The bill reflects a pivot away from federal support for electrification, prioritizing economic nationalism over environmental goals. While EV adoption will continue, driven by state policies and private innovation, the road ahead is bumpier. Owners and automakers alike must adapt to a landscape with fewer subsidies but new opportunities for American-made vehicles.