The potential elimination of the $7,500 federal tax credit for electric vehicles (EVs) in the United States could have significant repercussions for the auto industry and the broader economy, particularly as automakers like Kia are expanding their US-made EV lineups. This credit, currently available for North American-made EVs under the Biden administration’s Inflation Reduction Act (IRA), is reportedly being targeted for removal by the incoming Trump administration’s transition team.
Kia America COO Steve Center argues that ending the tax credit would negatively affect US jobs and the entire auto industry. In an interview with InsideEVs at the Los Angeles Auto Show, Center stated that ending the credit would be “dumb,” emphasizing that the government has guided the industry in a specific direction and should allow manufacturers to recoup their investments before altering the landscape.
Kia and its parent company, Hyundai, have invested heavily in US-based EV manufacturing, producing models like the EV6, EV9, and the upcoming Ioniq 9 in Georgia, partially to meet the IRA’s requirements for the tax incentive. Removing this incentive could jeopardize these investments and potentially impact future production plans.
Analysts predict a substantial decline in EV sales if the tax credits are eliminated. Some estimates project an immediate 27% drop in EV demand, highlighting the significant role these incentives play in consumer purchasing decisions.
Center further argued that ending the incentives would undermine the entire industry, not just Kia and other import brands. He pointed out that numerous companies have invested significantly to comply with current regulations, and removing the tax credit would effectively penalize them for their efforts.
The Zero Emission Transportation Association (ZETA), a trade group with members including Tesla, Waymo, Rivian, and Uber, supports the existing federal tax incentives for both EV production and sales. This underscores the broad industry consensus on the importance of these incentives for fostering the growth of the EV market.
Eliminating the tax credit could disrupt the burgeoning US EV market, potentially slowing down the transition to cleaner transportation and impacting job growth within the automotive sector. The long-term economic and environmental consequences of such a decision warrant careful consideration.
