US EV tax credit expiration reshapes electric vehicle market

US EV

US EV tax credit expiration after 15 years is reshaping vehicle affordability and demand across the US auto market. The US EV tax credit supported sales of models like the Tesla Model Y and Chevrolet Equinox EV. Now the US EV tax credit has ended, leaving buyers with higher upfront costs and manufacturers with greater policy uncertainty.

US EV tax credit expiration driven by politics and fiscal push

The US EV tax credit began in 2008 as a bipartisan tool to jump-start early EV adoption. It later expanded under the Inflation Reduction Act, which tied eligibility to US-made vehicles and domestic supply chains. However, Republican lawmakers and oil interests increasingly opposed the subsidy, arguing it distorted markets and threatened future gasoline demand.

As a result, the latest tax and energy law under president Donald Trump removed the incentive from 30 September. Lawmakers framed the US EV tax credit expiration as a way to save more than $190bn over ten years. The move reflects a broader rollback of climate-linked support measures, including plans to repeal greenhouse gas limits on cars and trucks. This policy reversal now clashes with long-term investment cycles for automakers and battery producers.

EV affordability and US supply chains face fresh headwinds

The end of the US EV tax credit comes while EVs still cost more than conventional cars. Recent data show US EVs carry an average price premium of around $8,000 over combustion models. Without the $7,500 federal incentive, many mass-market buyers lose a key financial lever that helped close the price gap. This will likely slow new orders, particularly in middle-income segments and fleet purchases.

Meanwhile, manufacturers warn that the loss of the credit weakens the business case for US-based EV and battery plants. The revised credit had pushed automakers to localise assembly and critical mineral sourcing inside the US or allied countries. Its removal undercuts one of the strongest pull factors for building gigafactories, cathode plants and related supply chain assets on US soil. Industry groups argue this shift could hand competitive advantage back to regions with more stable policy support.

State-level climate policy will now carry more weight in the US EV landscape. California and other Democratic-led states plan to maintain strict tailpipe standards and invest heavily in charging infrastructure. However, even ambitious state measures cannot fully compensate for the vanished federal incentive. Automakers must therefore navigate a patchwork of regional rules while recalibrating sales forecasts and capital plans in a post-credit market.

The Metalnomist Commentary

The US EV tax credit expiration exposes the tension between long-term industrial strategy and short-term political swings. For metals and battery supply chains, the key risk is stop-start demand that complicates investment in lithium, nickel and cathode capacity. Unless policy clarity returns, the US could cede ground to regions where EV incentives and climate regulations move in a steadier direction.