EV Tax Credits at Risk Under Trump: Why 2025 May Be a Pivotal Year to Buy

California is gearing up to combat potential efforts by President-elect Donald Trump to eliminate electric vehicle (EV) subsidies, adding a layer of uncertainty for the industry as 2025 approaches. Experts are urging prospective buyers to take note of current savings opportunities, as future incentives may be at risk.

“The outlook for EVs in 2025 seems increasingly unclear,” said Jay Turner, an environmental studies professor at Wellesley College specializing in clean transportation trends. California Governor Gavin Newsom’s recent announcement that the state would replace federal tax credits if the next administration eliminates them is “promising news for Californians,” Turner added.

While states like Colorado and Massachusetts already provide substantial EV incentives, these can be stacked with federal rebates. However, California, which saw its state EV incentives lapse last year, is now poised to fill the void if the federal rebates of $7,500 for new EVs and $4,000 for used ones introduced under the Inflation Reduction Act (IRA) are scrapped under a Republican-controlled White House and Congress.

“We’re committed to a cleaner transportation future,” Newsom emphasized in his statement on Monday. “We’ll ensure Californians can afford vehicles that help us fight pollution.”

The Uncertain Future of EV Incentives

Donald Trump has frequently criticized stringent emissions standards and has suggested eliminating EV tax credits, calling them “not generally a good thing.” While Trump’s transition team has not detailed specific plans, they’ve indicated a focus on “protecting gas-powered cars.” His spokesperson, Karoline Leavitt, emphasized that Trump aims to support both gas and electric vehicles.

Despite the continued growth of EV sales—1 million new EVs sold by October 2024 according to Cox Automotive—the rate of adoption has been slower than expected. Automakers are adjusting production to better align with demand, leading to concerns about fewer discounts and models being available next year. Ivan Drury, an industry analyst at Edmunds, noted that EV incentives, such as those under the IRA, have played a crucial role in maintaining market momentum, accounting for 13.7% of the average EV transaction price.

“We expect little chance of the current rebate program remaining untouched,” Drury said. “The bigger questions are how soon changes might happen and how consumers should respond.”

Why Now Might Be the Time to Buy

For potential buyers, acting before 2025 could be a smart financial decision. According to Drury, manufacturers are already working to balance production with demand, likely reducing available stock and discounts in the coming months. Additionally, with year-end promotions underway, most of the EV inventory consists of discounted 2024 models.

“If I were considering an EV, I’d make my purchase before year-end,” said Turner. He also warned that even if Congress doesn’t repeal federal credits, administrative changes under a Trump presidency—such as tightening rules on foreign battery sourcing—could sharply limit the vehicles eligible for tax incentives.

Another complicating factor is the potential for increased tariffs on goods from China, Mexico, and Canada. Trump has vowed to enact these tariffs on his first day in office, a move that would likely drive up car prices, including EVs.

Tesla’s Unique Position in the Debate

Tesla, the dominant player in the U.S. EV market, may be less affected if federal tax credits are eliminated. The company’s CEO, Elon Musk, who played an active role in Trump’s re-election campaign, has previously stated that removing subsidies would actually benefit Tesla. Musk’s stance has raised eyebrows, particularly as his company’s stock has surged following Trump’s victory.

California’s response to potential subsidy cuts may exclude Tesla from state rebates. Newsom’s office has suggested introducing a market share cap, which could disqualify Tesla and other leading automakers from receiving the proposed state aid.

Leasing as an Alternative

For buyers hesitant about the risks, leasing an EV offers a compelling option. Current federal tax credits apply to leases, and dealerships often pass on the savings to customers, lowering monthly payments.

A recent Edmunds analysis found that EV lessees saved significantly, with average monthly payments of $428 compared to $572 for gas-powered vehicles. Over a 36-month lease, this difference adds up to over $5,000 in savings.

“If these tax credits disappear, dealers will face challenges,” Drury noted. “But for buyers who act now, leasing offers a way to benefit from existing incentives without long-term risk.”

While EV adoption continues to grow, uncertainty looms for 2025. Federal tax credits and discounts may soon be scaled back or eliminated, leaving prospective buyers with fewer savings opportunities. Experts suggest acting sooner rather than later to take advantage of current incentives and year-end promotions.

For those ready to make the leap, this may be the ideal time to join the clean transportation movement.