Trump Ends Federal EV Tax Credit Phaseout Amid Policy Reversal

The federal electric vehicle tax credit, extended through 2032 under prior legislation, meets abrupt termination as President Trump invokes executive authority to dismantle remaining incentives. Automakers, who projected 1.5 million U.S. EV deliveries for 2026 bolstered by up to $7,500 per vehicle rebates, now recalibrate strategies toward hybrid and internal combustion models. The reversal, effective January 1, 2026, aligns with broader deregulation efforts targeting fuel economy standards, potentially elevating average transaction prices by $4,200 for battery-electric purchases.

The credit, part of the Inflation Reduction Act, covered 80 percent of eligible EVs in 2025, with 1.1 million claims processed by the IRS through November. Eligibility required North American assembly, battery sourcing from non-foreign entities of concern, and income caps at $150,000 for individuals. Tesla captured 42 percent of credits redeemed, followed by General Motors at 18 percent and Ford at 12 percent, per Department of Energy data. Termination eliminates point-of-sale rebates, shifting burden to state-level programs in 22 jurisdictions offering up to $5,000.

Automakers respond variably to the policy shift. Ford pauses production of the electric ‘F-150 Lightning’ at its Michigan plant, idling 900 workers for three months to assess demand without subsidies. The model, with 320 miles of range and 580 horsepower from dual motors, averaged 42,000 annual sales reliant on 65 percent credit uptake. General Motors accelerates hybrid ‘Equinox’ rollout, blending a 1.5-liter turbo with electric assist for 40 mpg combined, targeting 200,000 units in 2026.

Rivian, producer of the ‘R1T’ truck with 410-mile range and 835 horsepower quad-motor setup, reports 15 percent stock decline in after-hours trading. The company, which utilized credits for 85 percent of 51,000 deliveries in 2025, seeks $1.5 billion in federal loans to bridge the gap. Lucid halts expansion of Arizona facility, originally slated for 90,000-vehicle capacity by 2028, citing 22 percent cost inflation absent incentives.

Industry analysts forecast EV market share contraction to 6.2 percent in 2026 from 7.9 percent in 2025, per Cox Automotive projections. Hybrid sales, conversely, climb 28 percent to 2.3 million units, led by Toyota’s ‘Prius’ at 150,000 projected volumes with 57 mpg efficiency. Consumer surveys from J.D. Power indicate 62 percent of potential EV buyers cite affordability as the primary barrier post-credit.

The administration justifies the move by referencing $14 billion in foregone revenue over five years, redirecting funds to infrastructure repairs averaging $2.4 trillion nationwide. Transportation Secretary Pete Buttigieg, in a December 6 briefing, warns of 150,000 job losses in battery supply chains, concentrated in Michigan and Georgia. Environmental groups project 12 million additional metric tons of CO2 emissions annually, equivalent to 2.6 million vehicles idling.

Dealership inventories swell with 180,000 unsold EVs as of November 30, prompting discounts up to 20 percent on models like the Chevrolet ‘Bolt EUV’ with 247-mile range. Second-hand EV values dip 8 percent quarter-over-quarter, per Kelley Blue Book, benefiting early adopters. Manufacturers pivot to export markets, with Ford eyeing Europe where subsidies persist through 2030.

This policy caps a year of flux, including California’s $9,500 state credit for low-income buyers and Texas rebates tied to grid contributions. U.S. EV registrations totaled 1.23 million through November, down 4 percent year-over-year amid incentive anticipation. The shift underscores a return to consumer-driven propulsion choices, with gasoline vehicles comprising 82 percent of 2025 sales at an average 28 mpg fleet efficiency.