Trump's 'Big, Beautiful Bill' is bad for American EVs, but it could have been worse

Engadget

02-07-2025

President Trump's " Big Beautiful Bill " has squeaked through the Senate in time for this weekend's pyrotechnic celebrations. The bill festively shoots down a long list of environmental protection measures of all shapes and sizes, with the red glare of those rockets looking set to burn all current federal EV rebates in particular.
While the exact timing is still in flux, as things stand the $7,500 federal rebate for electric vehicles would expire not in 2032 as originally specified, but as soon as the end of September. It's an abrupt, ignominious end to a series of incentives that, in some form or another, dates back to the George W. Bush administration.
This change doesn't just cover new consumer vehicles, like the Kia EV9 or Volkswagen ID.Buzz . It also eliminates the $4,000 federal credit on used EVs, and even stands to kill rebates for commercial vehicles of the sort that inspired a whole new and weird generation of electric vans like those from Rivian and Arrival (RIP).
All those initiatives were meant to drive down the environmental impact of a transport industry that, combined, makes up 29 percent of total US greenhouse gas emissions . While that unfortunate environmental impact might not be immediately felt, for anyone considering buying an EV, some pain in the wallet is coming much sooner.
But it could have been worse.
Earlier versions of the bill imposed a $250 annual fee for EV owners, and a still-spiteful $100 for hybrid owners. That fee would go into effect regardless of when you bought your wheels, so even if you were doing the electric thing before it was cool , you'd have been stuck with a substantial annual premium.
That fee was to be directed to the Highway Trust Fund, ostensibly ensuring that EV owners are paying their fair share for federal transportation infrastructure maintenance. The bulk of that funding comes from an 18.4 cents per-gallon tax on gasoline, which imprecisely ensures that drivers are paying roughly their fair share for highway use.
This supposed attempt at EV equivalence, however, was structured in a wildly disproportionate way. The average American drives 11,318 miles per year, according to the Department of Energy, which works out to just under $100 annually in taxes on gasoline. That's less than half the proposed annual fee for EVs. Yes, electric cars and their heavy batteries do indeed wear out roads more quickly , but not to that degree.
That felt more than a little unfair, but lawmakers faced an even bigger roadblock: They literally couldn't make such a fee structure work. "There is no mechanism today for the federal government to collect an annual fee," Ohio Republican Senator Bernie Moreno told Politico .
Regardless of the reasoning, for now at least, this fee is no longer part of the bill.
American EV sales haven't exactly been following the hockey stick growth that most industry experts had formerly been projecting. Still, it has been steadily trending upward. American EV sales in the first quarter of this year were up 10 percent, according to Cox Automotive , and that's despite Tesla's precipitous slide of late.
Considering the average cost of a new car in the US is $48,799, and the average cost of a new EV is $57,734, that $7,500 federal EV tax credit clearly makes a substantial difference in bridging that gap. Assuming the Big Bill passes, that bridge will be demolished in just a few months time.
While it's impossible to say how much the American EV market's growth has been driven by those incentives, we can look at the impact such cuts have had in other markets. Germany's Climate and Transformation Fund paid out €10 billion between 2016 and 2023, chipping in towards the purchase of 2.1 million EVs.
EV sales declined in Germany by 16.4 percent through the first half of 2024 after that program ended. Meanwhile, elsewhere in Europe, EV sales continued to grow by nearly 10 percent. It's looking like it was only a temporary setback, though. In the first five months of this year, German EV registrations are up more than 40 percent . That, again, is despite Tesla's particularly steep decline there .
As to which manufacturers will be most impacted, it stands to reason that buyers looking for with lower-priced EV offerings — cars from brands like Hyundai, Kia and Nissan — will take this change the hardest; buyers of premium brands — like Mercedes-Benz, BMW and Porsche — will be a little less dissuaded. Regardless, it should come as no surprise that not a single vehicle manufacturer is found in the list of endorsements for the "Big Beautiful Bill."
You will, however, find a who's who of players in the petrochemical world, like the American Petroleum Institute, Chevron, ConocoPhillips and Coterra.
The bill won't just kill incentives for EV buyers or leasers. America's charging infrastructure is also set to take a hit thanks to the repeal of the Alternative Fuel Vehicle Refueling Property Credit. This covered up to 30 percent of the cost of EV charger installation, encouraging more businesses to put more chargers in more places.
Deleting that credit certainly won't help the stubbornly slow buildout of America's charging infrastructure.
Critics of the American federal credit program have long said that it was too frequently used by wealthy buyers to chip a little off the cost of their next luxury EV. That, at least, is being addressed in one of the bill's other transportation-related changes, something that could actually be a positive for many Americans.
The bill includes a new tax deduction that could help modern shoppers saddled with debt after a car purchase. If passed, the bill would allow buyers with car or motorcycle loans to claim up to $10,000 in interest per year on their taxes.
This applies to vehicles regardless of propulsion type, meaning EVs and hybrids qualify, but there are plenty of other criteria, including that the vehicle must be for personal use, cannot have a salvage title, and must have undergone final assembly in the United States. Beyond that, to claim the full deduction, individuals must have an adjusted gross income (AGI) of less than $150,000 if filing as an individual, or $250,000 for a married couple filing jointly.
If you're a shopper who's been on the fence about buying an EV, it's safe to say that now would be a very good time to pull the trigger. And I do mean now. The federal rebate may carry through September, but extra dealer incentives will be drying up quicker than crocodile tears.
If, on the other hand, you're a manufacturer of EVs, chances are there's not a lot you can do right now. The auto industry was not designed to react to the whims of our current presidential administration and the gasoline-loving special interests that fuel it. Hopefully, the success of your business wasn't tied to the continued existence of federal incentives — or, indeed, a lack of import tariffs .
Going forward, American EV offerings will need to be one of two things: Priced on par with the internal combustion competition, or so fundamentally compelling that they're worth the extra cost. If your vehicles don't meet that criteria, come October you might have a problem.