How Trump Could Upend Electric Car Sales

Many car buyers have come to rely on a $7,500 federal tax credit on electric vehicles to soften the blow of their high prices. But those credits could disappear after President-elect Donald J. Trump takes office, leading to an almost immediate drop in sales of the cars and trucks.

Electric car sales could fall 27 percent if consumers lose the tax break, according to estimates published last week by two economics professors, Joseph Shapiro of the University of California, Berkeley, and Felix Tintelnot of Duke University. Registrations of electric models are on track to hit 1.2 million this year, and estimates are that there would be about 317,000 fewer registered annually without the credit.

Other countries that eliminated such subsidies have seen similar drops — in Germany, electric vehicle sales tumbled 27 percent in the first 10 months of the year, after the government last December abruptly canceled an incentive worth $4,900.

“You can’t make a vehicle $7,500 more expensive and sell more of them easily,” said Chris Harto, a senior policy analyst for Consumer Reports. “People are only willing to pay so much.”

The tax credits, which can be as high as $7,500 for new electric cars and plug-in hybrids, and up to $4,000 for used models, are a cornerstone of President Biden’s Inflation Reduction Act, a law meant to address climate change and spur domestic manufacturing. Since January, consumers who buy or lease eligible cars have driven home with $2 billion in credits on 300,000 cars, according to the Treasury Department.

New-car prices are flat in 2024, but have risen nearly 30 percent since the start of the pandemic. And the gap between battery-powered cars and internal combustion models remains stubbornly wide. Consumers paid $56,900 on average for an electric car in October, $9,000 more than for the average gasoline car or hybrid, according to Kelley Blue Book, though the tax credit often significantly reduced that gap.