Trump plans to kill federal electric vehicle tax credit. California could replace it

Rob Hayes Image
Tuesday, December 3, 2024
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California could replace federal EV tax credit if Trump kills it
California lawmakers, worried electric vehicle sales will lose traction if President-elect Donald Trump kills a federal tax credit, are considering replacing that credit with a new state incentive.

California lawmakers, worried electric vehicle sales will lose traction if President-elect Donald Trump kills a federal tax credit, are considering replacing that credit with a new state incentive.

Throughout his campaign, Trump made it clear he wanted to wipe out the $7,500 federal tax credit that was a part of President Joe Biden's Inflation Reduction Act. The U.S. Treasury Department said so far this year, consumers have collected about $2 billion in credits by purchasing cars and trucks that qualify.

"EV sales will definitely take a ding," Edmunds.com Director of Insights Jessica Caldwell said. "People will feel as though they lost out on such a great opportunity, and I think that hurts more than even the reality of the situation."

Gov. Gavin Newsom said if Trump kills the federal EV tax credit, then California will replace it for its residents. The day after the presidential election, Newsom called for a special session of the California legislature, which convened Monday afternoon and kicked off efforts for the state to counter any plans from the incoming Trump administration they find troubling. The possible loss of the federal EV credit is one of the issues on the list.

"California wants to dominate in this next big global shift," Newsom said.

No other state has moved toward electric vehicles faster than California. More than 2 million electric vehicles have been sold in the Golden State. In Los Angeles, about 27% of all new car sales are for electric vehicles. In the Bay Area, that number is around 35%.

Potential car buyers see the federal tax credit as a big reason to go electric over standard gas-powered cars and trucks.

"I hope it's something that they keep around, especially for people who are on the fence because they are also costly," said Pasadena resident Nicole Earl, who already drives an electric car.

"When we bought our electric car, that was one of the major factors, mainly for costs and the incentives to do it," Los Angeles resident J.P. Chehade said.

Critics say Newsom's pledge to provide EV rebates will be expensive, and that the state needs to be more transparent about the overall price of switching to electric vehicles.

"We should be honest about what it costs California drivers and California electricity customers," said Susan Shelly of the Howard Jarvis Taxpayers Association. "You can make the choice if you want to, but we should be honest with everybody about how much it's increasing the bills you pay every month."

Newsom hasn't released any specifics about his plans to replace the federal credit if it does go away. Analysts say the amount of the rebate and those who would qualify could be considerably less simply because of the cost.

"$7,500 for each (electric) vehicle sold -- that's a pretty tall bill at the end of the day that California will be paying in this program," Caldwell said.

Another reason the federal credits are so important: electric vehicles are not cheap. Their average price is about $9,000 more than the average gas or hybrid vehicle.

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