EV Demand Could Drop 27% Without Tax Credit
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Eliminating the U.S. electric vehicle tax credit would dent future EV demand — perhaps by more than a fourth — while providing a trivial boost to gasoline consumption, economists estimate.
U.S. auto stocks fell last week on reports that President-elect Donald Trump may try to kill the $7,500 credit, which was part of the 2022 Inflation Reduction Act. Removing it could cut future EV demand by 27%, said Joseph Shapiro at the University of California, Berkeley. Annual EV registrations in the U.S. could fall by 317,000 cars compared to what they would have been if the credit remained intact, according to Shapiro and Felix Tintelnot at Duke University.
And yet, because EVs still account for a small percentage of new car sales, removing the credit would have little impact on gasoline demand.
Gas consumption would increase 155 million gallons in the first year, Shapiro and Tintelnot said. Over the course of a decade, the U.S. would use about 7 billion more gallons than it would have if the credit stayed in place. While that may sound substantial, it represents just 5% of the 136 billion gallons the U.S. uses in a typical year, Shapiro said in an email.
Even if Trump eliminates the tax credit, EV adoption in the U.S. will not stop, Morgan Stanley analyst Adam Jonas said in a research note this week. “While a slowing of EV adoption can provide valuable time for some legacy players to catch-up, we still expect EV penetration to keep rising long term as innovation and scale will bring lower cost and higher performance products,” he wrote.
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