Auto retailers, including giants like CarMax y Carvana, are pressing the Senate to maintain electric vehicle (EV) tax credits in the upcoming budget bill, warning that their abrupt removal could destabilize dealerships heavily invested in EV infrastructure. A June 26 letter from retailers highlights the economic risks of slashing incentives critical to EV adoption, according to Automotive News.

Dealership Investments at Risk

Dealerships have poured billions into EV sales and service, installing on-site chargers and upgrading service bays to meet automaker mandates.

“Dealerships like ours have invested billions of dollars as small businesses to serve our communities, to improve EV education, and offer exceptional service,” retailers stated in the letter.

Without tax credits, such as the $7,500 new EV credit, these investments could falter, threatening jobs and local economies. The Senate’s proposal would end this credit 180 days after passage, while the House version delays the cut until December 31, 2025.

The National Automobile Dealers Association (NADA) emphasized the inventory burden, noting that dealers currently hold about 140,000 EVs on lots.

“If EV tax credits are going to be repealed, NADA urges Congress to include a reasonable transition period,” NADA said in a June 27 statement.

Consumer Savings and Market Stability

EV tax credits have driven affordability, particularly for used vehicles. A rule change allowing the credit as a down payment has expanded access for middle- and lower-middle-class buyers.

“When they changed the rule to allow customers to use [the tax credit] as a down payment rather than a deduction on their taxes, it opened up a whole new world of opportunity for middle-class and lower middle-class folks,” said Alex Lawrence, owner of EV Auto in Bountiful, Utah. Without credits, Lawrence predicts a 25–30% sales drop at some dealerships.

David O’Brien, used-car sales manager at Campbell Auto Group in Edmonds, Washington, credits the incentives for fueling 40% of his sales. Located 15 miles (24 kilometers) from Seattle, his dealership benefits from EV-friendly short commutes. A J.D. Power survey confirms tax credits as a top reason for EV purchases in 2024 and 2025.

Industry and Policy Implications

Retailers also oppose a proposed $250 EV and $100 hybrid annual registration fee floated by House Republicans, arguing it unfairly taxes EV drivers.

“EV drivers would be paying disproportionately and discouragingly high taxes under such a proposal,” the letter noted. The Senate’s proposal omits these fees, aligning with retailer advocacy.

Mazda acknowledged the competitive edge credits provide, stating, “If tax credits are abolished, the price competitiveness of BEVs and PHEVs relative to internal combustion engine vehicles is generally expected to decline.” However, most automakers told Automotive News their sales strategies would remain unchanged.

A Call for Gradual Change

Retailers advocate for a multi-year phaseout to stabilize the used EV market, a key economic driver.

“Sudden elimination will disrupt the used car market, a backbone of the American economy,” the letter warned.

Lawrence supports this approach, noting his business thrived before credits and will adapt, but a gradual transition would ease the shift for consumers and dealers alike.

With Congress racing toward a July 4, 2025, budget deadline, the fate of EV incentives hangs in the balance, impacting retailers, consumers, and the broader push for cleaner transportation.

Photos courtesy of Carvana