U.S. EV Tax Credit Faces Elimination, Threatening GM and Ford’s Electric Push

A proposed budget from House Republicans could end the $7,500 federal tax credit for electric vehicles (EVs), a move that may stall EV adoption and hit automakers like General Motors (GM) and Ford hardest, while Tesla stands to gain. The proposal, aimed at reducing federal spending, could reshape the EV market just as legacy automakers ramp up production.

How the Tax Credit Fueled EV Growth

The federal EV tax credit, offering up to $7,500 for new EVs and $4,000 for used ones, has been a lifeline for buyers since its inception. Claimed during tax filing, it reduced tax liability for qualifying vehicles built in North America with specific battery material sourcing. Income caps applied, ensuring benefits targeted middle-class buyers. This incentive drove EV sales, with over 1 million credits claimed since 2010, supporting automakers’ shift to electric.

The Proposal’s Impact on Automakers

The GOP plan would eliminate both new and used EV credits, alongside support for battery plants and clean energy. For GM and Ford, who’ve invested billions in EV infrastructure—GM’s Ultium platform and Ford’s BlueOval campuses, spanning over 1,500 acres (607 hectares)—this is a setback. These companies rely on credits to make their EVs, priced around $40,000-$60,000, competitive. Without the $7,500 discount, consumer demand could falter, delaying profitability projected for 2026.

Ford’s BlueOval City in Tennessee, a $5.6 billion (USD) project, aims to produce 500,000 EVs annually by 2026. GM’s battery plants in Ohio and Michigan cost over $2 billion each. Losing credits could force price cuts or scaled-back production, straining budgets already stretched thin.

Tesla’s Strategic Advantage

Tesla, producing most vehicles in the U.S., is less affected. Its supply chain control and profitable Model 3 and Model Y, starting at $44,990, allow price flexibility. Tesla’s Fremont factory outputs over 600,000 vehicles yearly, and its gigafactories secure battery supply. Without credits, Tesla can maintain competitive pricing, potentially capturing more market share. As one lawmaker noted, “Tesla’s built for this; they don’t need the government’s help”.

Leasing as a Lifeline

Leasing offers a potential workaround. Commercial buyers, like leasing firms, can claim the $7,500 credit, often passing savings to consumers via lower payments. In 2024, EV leases grew 40%, with models like the Hyundai Ioniq 5 leasing for $299/month. Unless the proposal closes this loophole, leasing could soften the blow for buyers, though it limits long-term ownership benefits.

What’s Next for EV Buyers

If passed, the proposal could trigger a short-term EV sales spike as buyers rush to claim credits before they expire, likely in early 2026. Post-deadline, sales may dip, with mass-market EVs like the Ford Mustang Mach-E ($43,995) or Chevrolet Equinox EV ($33,600) losing appeal without the $7,500 discount. This could slow EV adoption, currently at 7% of U.S. vehicle sales, and delay climate goals targeting 50% EV sales by 2030.

For buyers, acting fast is key. Dealerships may offer incentives to clear 2025 inventory, but 2026 prices could rise by thousands. Meanwhile, regulatory shifts, like California’s proposed autonomous vehicle rules, signal a complex future for transportation.

Industry Ripple Effects

The credit’s end could chill investment in U.S. battery production, with plants costing $1-$3 billion each. It may also shift focus to hybrids, cheaper to produce and exempt from sourcing rules. For GM and Ford, retooling for slower EV growth could cost millions, while Tesla’s head start—10 years ahead in scaling—positions it to dominate.

EV enthusiasts face a tougher road, but leasing and state incentives, like California’s $2,000 rebate, offer hope. For now, the clock’s ticking on the $7,500 credit that made electric dreams more affordable.