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Trump administration prepares to end Biden’s EV tax incentive, report says

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If you’re looking to buy or lease an electric vehicle (EV) and benefit from the Biden administration’s $7,500 tax incentive, you’d better act soon.

The transition team of the incoming Trump administration is already planning to end the credit, according to a report from Reuters citing sources with direct knowledge of the matter.

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Under the Biden administration’s Inflation Reduction Act (IRA), an EV with key components, including batteries, made in the U.S. is eligible for the incentive upon purchase or lease of the vehicle.

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EVs recently accounted for 6.8% of all vehicles sold in the U.S., up 1.6% from 2022, when the IRA was passed. According to some estimates, the share of EVs was expected to grow to 33% of the U.S. market in 2030. But following the results of the U.S. presidential elections, those estimates are now down to 28% of the market.

Despite the expected hit to EV sales, Trump’s plan to end the incentive has received the blessings of representatives from Tesla, the bestselling EV maker in the U.S.,  sources quoted in the Reuters report say. Tesla CEO Elon Musk was recently appointed by the incoming administration to lead a newly created “Department of Government Efficiency”.

In July, Musk was asked if he thought ending the incentive might hurt Tesla sales.

“I guess that there would be some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Musk said during a call with investors. “Long term, [this] probably actually helps Tesla,” he added.

Besides the tax incentive, the Biden administration this year imposed 100% tariffs on Chinese-made electric vehicles, which are leading the global race in making EVs more affordable. Keeping those out of the U.S. will already limit competition and put a floor on EV prices domestically.

Tesla’s Musk recently said that lowering the price of a regular Tesla model down to $25,000 would be “pointless” and “silly.” Tesla, Musk said, believes “the future is autonomous,” referring to the recent launch of its Robotaxi self-driving vehicle.

Some rival EV makers, meanwhile, are trying to enter the affordable space more aggressively in the U.S.

General Motors has already released its Chevy Equinox EV at a price of $27,500, including federal tax credits. Volkswagen America says it plans to release an under-$35,000 EV in the U.S. by 2027.

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Nick Godt
Nick Godt
Freelance reporter
Nick Godt has covered global business news on three continents for over 25 years.
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Enthusiasts expecting to one day put their hands on the steering wheel of a $25,000 Tesla EV may feel like they’ve been taken for a ride.
CEO Elon Musk has just put a serious damper on those expectations, saying that outside of the driverless Robotaxi recently unveiled by Tesla, a regular $25,000 model would be “pointless” and “silly.”
During a conference call with investors, Musk was asked to clarify whether such a model was in the works.
"Basically, having a regular $25K model is pointless,” Musk said. “It would be silly. It would be completely at odds with what we believe." Tesla, Musk continued, has “been very clear that the future is autonomous.”
On October 10, Tesla unveiled its much-awaited robotaxi, called the Cybercab, an autonomous-driving EV with no steering wheel or pedals. The company also unveiled the Robovan, a much larger autonomous vehicle expected to carry people or goods.
The automaker said the Cybercab is expected to be produced in 2026 and cost $30,000. Musk, meanwhile, said that it would be a $25,000 car without specifying if that price tag included federal tax credits.
Tesla’s ambiguity about an affordable entry-level model has been going on for years. In 2020, Musk signaled that a $25,000 Tesla would arrive within three years. It was later reported that Tesla had ditched the idea, instead favoring the development of a robotaxi.
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Some rival EV makers, meanwhile, are entering the affordable space more aggressively in the U.S.
General Motors has already put out its Chevy Equinox EV at a price of $27,500, including federal tax credits. Volkswagen America says it plans to release an under-$35,000 EV in the U.S. by 2027.

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A surge in sales of electric vehicles in the final months of last year could continue well into 2025, as consumers continue to take advantage of federal tax incentives while they last, according to a report by the Associated Press.
On the day of his inauguration, President Donald Trump signed an executive order titled “Unleashing American Energy”, which says the government is “considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies.”
During his campaign, Trump’s team said it was planning to end the Biden administration’s $7,500 tax credit on the purchase or lease of an EV, although it did not provide a timeline for doing so.
Americans rushed to take advantage of the incentive, helping fuel a surge of more than 15% in EV sales in the fourth quarter, according to Cox Automotive.
Recent surveys show that incentives have played a major role in fueling EV sales over the past few years, and that a majority of Americans are in favor of government incentives to help with the purchase of an EV.
Meanwhile, the wording in Trump’s executive order, which says his administration is still 'considering' its options, leaves room for ambiguity about the timing of its application.
“Temporarily, sales of EVs could skyrocket as car-buyers rush to take advantage of existing tax credits,” the report by the Associated Press says.
In order to repeal the EV tax credit, the Trump administration will need to obtain the approval of congress. The process will likely take place as part of broader negotiations on extending Trump’s first-term tax cuts, which are due to expire near the end of 2025.
It’s also not entirely clear if the Trump administration will seek to end the whole of the $7,500 EV tax incentive. In order to obtain the incentive for the purchase of an EV, restrictions apply for high-income households and for EVs with non-U.S. made batteries. But those restrictions don’t apply to leasing an EV.
According to Cox Automotive, members of the Trump administration are particularly keen on ending “this leasing loophole, which was created partly to appease Korean and Japanese automakers, who have invested billions in U.S. EV manufacturing.”
Ending rebates and other subsidies for EVs is also likely to meet challenges, be they legal or political, from different actors.
The Zero Emission Transportation Association (ZETA), a trade group whose members include the likes of Tesla, Waymo, Rivian, and Uber, has come out in support of incentives for both the production and the sale of EVs.
ZETA says the incentives for both EV and battery-makers have led to enormous investments and job gains in Republican-dominated states like Ohio, Kentucky, Michigan, and Georgia.

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