July 8, 2025 - The US EV Market Is About to Get Tougher

This is the Telemetry Transportation Daily for July 8 2025 and I'm Sam Abuelsamid, VP of Market Research for Telemetry.

The Trump administration's war on everything that could be considered remotely environmentally friendly technology scored a big win last week with the passage and signing of a massive tax and spending bill that will add several trillion dollars to the US debt. From an automotive perspective one of the biggest impacts is the elimination of the clean vehicle credits that were part of the 2022 Inflation Reduction Act. The IRA provided for federal tax credits of up to $7500 for the purchase of new plug-in electric vehicles assembled in North America with that met minimum requirements for battery content sourced in North America or from free trade partners. There is also a $4000 credit toward the purchase of a used EV at least 2 years old. Both of these programs had gradually increasing domestic content requirements and were scheduled to expire at the end of 2032. 

After going through several iterations during the course of developing the bill, that included phasing out the credits at the end of 2025 and potentially allowing a longer phase-out with a sales cap of 200,000 units, the Senate ultimately opted to eliminate all the credits after Sept 30 2025, less than 3 months from now. This also includes ending the commercial vehicle sales loophole that allowed the new vehicle credits to claimed on vehicles that failed to meet the domestic assembly requirement by leasing. 

That means means that after this quarter, many plug-in vehicles will effectively become significantly more expensive to consumers. This is further exacerbated right now because of the Trump administration's imposition of 25% tariffs on vehicles imported from Japan and South Korea. This comes as Toyota, Nissan and Kia were preparing to launch new EVs later this year with the Kia models including the EV4 and EV3 being more affordable. 

The likely near term result of this is a surge in EV sales between now and the end of September. Ford has just announced a $0 down payment, 0% interest financing and $0 payment for 3 months promotion on selected models that include its 3 EVs and GM will likely be pushing its EVs hard this summer as well. Sales transactions need to be completed by September 30 to qualify for credits before they go away. In the fourth quarter there is likely to be a notable slowing of sales. Automakers will need to spend heavily on incentives to maintain momentum and work aggressively to reduce the cost of their EVs to avoid falling further behind the rest of the world, especially China. 

Thanks for listening.