Automakers push EV sales as $7,500 US tax credit is set to end

By Nora Eckert and Abhirup Roy

DETROIT (Reuters) -Automakers are urging customers to snap up electric vehicles before a $7,500 U.S. tax credit goes away this fall.

Tesla's homepage on Tuesday displayed a banner: "$7,500 Federal Tax Credit Ending. Take Delivery by September 30, 2025."

The same day, Ford Motor extended its deal for free home chargers and installation through the end of September to entice EV shoppers.

Sweeping tax and budget legislation approved by Congress will eliminate $7,500 tax credits for buying or leasing new electric vehicles and a $4,000 used-EV credit at the end of September. The subsidies have boosted EV sales in recent years, and some dealers and analysts expect shoppers to rush to take advantage of the credit before it expires.

"This is certainly a great time to be considering an EV," Rivian's finance chief Claire McDonough said in an interview on Tuesday. Once the tax credits end, Rivian might introduce additional incentives, including financing deals, depending how the broader industry reacts, she said.

Demand for battery-powered models already has slowed after rapid growth earlier this decade. Sales could drop after the credits dry up, auto executives and analysts have warned.

"The $7,500 tax credit is driving demand; without that, that'll slow," General Motors CEO Mary Barra said at an event in December 2024.

Electric vehicle registrations could fall 27% without the tax credit, according to a joint study in November from professors at the University of California, Berkeley; Duke University and Stanford University.

Such policy shifts have affected EV adoption in other countries. EV sales fell sharply in Germany after subsidies ended in late 2023.

Congress approved a $7,500 tax credit in 2008 for electric cars and plug-in hybrid vehicles. The 2022 Inflation Reduction Act extended the credit, while also limiting eligibility to EVs built in the U.S. that use certain levels of domestically sourced batteries and materials.

"We believe (the third quarter) will see a significant EV pre-buy, with sharp declines in the months to follow," said Barclays analysts in a note.

Dmitry Agapitov, sales manager at Northwood Chevrolet and Hyundai in Eureka, California, cited major sales bumps at his dealership ahead of past deadlines, including in spring, as buyers shopped to avoid tariff-related price hikes. He expects a similar sales spike this time.

"We're anticipating it to play a factor," he said.

Battery-powered models could get a much-needed jolt. EVs have been a hard sell because of concerns around insufficient charging infrastructure and high prices, surveys show. A new EV sold for about $58,000 on average in May, almost $10,000 more than the average new price across the industry, according to Cox Automotive data.

U.S. President Donald Trump's team has been strategizing since late 2024, before his inauguration, about how to kill tax credits for electric vehicles. Some consumers took early notice and bumped up their EV purchases.

"If there's anyone who hasn't bought their EV yet, they're likely to be encouraged to buy in the third quarter. Consumers believe there is a deadline to reach now," said Sam Fiorani, vice president at research firm AutoForecast Solutions.

In the past, automakers have increased consumer incentives to help offset the loss of tax subsidies. Ford slashed prices on its Mustang Mach-E after it lost a $3,750 tax credit in January 2024 and sales dropped. GM offered a $7,500 incentive on vehicles that lost the credits. 

(Reporting by Nora Eckert in Detroit and Abhirup Roy in San Francisco; Editing by Mike Colias and Richard Chang)