When I first started writing this article a little over a week ago, I’ll be honest, I thought the article would go differently. At that time the provision and current rules for tax credits on electric vehicles looked to all the world like they would be changed to benefit the sales of EVs. But in just a week since I typed those first words, things have changed a fair bit and the news is now not nearly so good. Before we get on to what has happened and why, let’s start with what I thought I would be writing about.

The Good

For quite a while the big players in the EV arena, namely Tesla and General Motors, had actively been pushing the government and power players in Washington to amend and increase the amount of tax credit for those purchasing new and used electronic vehicles. The current provision enacted in 2008 allows for $7,500 to be claimed back from each new electric car bought, thus reducing the cost of the car and making it more attractive to buyers. The problem Tesla and other carmakers were having is that the credit was only available to companies that sold less than 200,000 vehicles. With both GM and Tesla heading above the cap, the tax credit was no longer available to them.

But after spending months of lobbying, both Tesla and GM thought they had gained traction and were looking forward to the cap being increased. Not only that, for the first time, there also appeared to be a federal tax credit of up to $2,500 for used EVs on the horizon. While this credit had many limitations, such as the EV having to be sold for less than $25,000 and the tax credit amount being tied to the buyer’s income, it was potentially good news for many car buyers thinking about taking the first steps into the EV arena. We waited with bated breath for the changes to be announced… 

But unfortunately, things have changed and the situation is now no longer quite so rosy.

The Bad

No sooner had the news story above broken than the federal government shot it down in gas-powered flames with the announcement that the expansion of tax credit for electric vehicles won’t appear in the broad deal being negotiated by House and Senate leaders.

This is despite the tax break being credited with helping the electric car market gain traction in the US. It has, however, long been a bone of contention for Republicans who see it as bill aimed solely at wealthy liberals and it would appear that they have finally gotten their way.

But are the Republicans in Washington solely to blame? Well, no. There is one other major factor that seems to have taken a hands-on approach in making sure not only that the tax break remains unenhanced, but potentially scrapped altogether. Step forward, Mr Trump.

The Ugly

According to leading Senators, there has been extreme resistance from the President to improving the tax credit for EVs. In fact, it would appear that the Whitehouse was ready to step in and scupper any legislative attempts to do so. Why? Well, apparently President Trump is looking to protect the middle-class taxpayers of the US and is opposed to anything that detracts or is at odds with this “ideology”. This means those looking to buy Tesla or GM electric vehicles from January 1, 2020 will no longer be entitled to any form of tax credits. This, in turn, may see the cost of EVs going up. 

As it stands right now nothing is certain. Tax breaks are still in place for other EV manufacturers who have yet to go above the 200,000 threshold. Whether the Trump administration will change this is unclear. After all, they have bigger fish to fry right now and tax credit talk might have to take a back seat. 

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