A tax and policy bill passed by House Republicans on Thursday would deal a serious blow to electric vehicles by repealing many of the subsidies that have been critical to the growth of the technology.
If passed by the Senate and signed into law by President Trump, the bill would sharply slow the sales and production of battery-powered cars and trucks in the United States and set back the global effort to address climate change.
The measure would gut subsidies for battery manufacturing, incentives for purchases of electric vehicles by individuals and businesses, and money for charging stations that Congress passed during the Biden administration. And it would impose a new annual fee on owners of electric cars and trucks.
Republican leaders have said the subsidies they want to repeal were ill conceived and largely benefited affluent car buyers. They aim to use the money the government saves on the incentives to cut taxes, primarily for high-income households and businesses.
Electric vehicles will not disappear from dealerships if the bill becomes law, analysts said, but they are likely to become a lot more expensive than they would have otherwise been. Some automakers may decide to delay plans for new car and battery factories.
The rollback of sales incentives will leave the United States even further behind China and Europe, where electric vehicles make up a larger percentage of new car sales and are growing much faster. Most auto executives believe that electric vehicles will eventually displace cars with internal combustion engines.
“In the long term we’ll get there,” said Jessica Caldwell, head of insights at Edmunds.com. “It feels like the next decade is going to be bumpy.”
Elimination of the subsidies, especially a $7,500 tax credit for the purchase or lease of electric cars and trucks that would end at the end of the year for most models, would effectively raise prices for car buyers. Such cars already cost thousands more than gasoline models. The price increases would come on top of those caused by Mr. Trump’s 25 percent tariffs on imported cars and auto parts.
The legislation also imposes a $250 annual fee on owners of electric vehicles to compensate for lost revenue from gasoline taxes. But the fee is more than double the average yearly fuel taxes that owners of conventional vehicles pay.
The Republican legislation would also lead to higher emissions of greenhouse gases and dirtier urban air, environmentalists say.
“We will not realize the energy efficiency and health benefits as fast as we could and as fast as other countries are realizing them,” said Eleftheria Kontou, an assistant professor at the University of Illinois who studies electric vehicle demand.
Technology and Sales
Cutting off the funding could handicap the United States’ chances of competing in electric vehicle technology with its main geopolitical rival. One of the main goals of the Inflation Reduction Act of 2022, the Democratic legislation that Republicans are trying to repeal, was to help finance factories in the United States that could compete with China, which dominates the supply chain for electric vehicles.
“It’s a big win for China and bad for American manufacturing,” said Mike Murphy, a veteran Republican political operative who is chief executive of the EV Politics Project, a group that seeks to end what it calls “the needless partisan divide over E.V.s.”
The divide is real. Senator John Barrasso, a Wyoming Republican and leading opponent of electric vehicles, has called the subsidies “in essence a Biden giveaway to costal elitists who drive electric vehicles.”
If Republicans follow through on plans to repeal these incentives, automakers will sell eight million fewer electric vehicles in the United States by 2030 than they would have otherwise, according to research by Jesse Jenkins, an assistant professor at Princeton University. Instead of 40 percent of new car sales in 2030, electric vehicles would account for 24 percent, he estimated.
But analysts still expect electric vehicle sales to grow. Battery technology is improving rapidly while prices are falling, making electric vehicles more affordable and practical.
A study by the International Council on Clean Transportation, a nonprofit research organization in Washington, found that by the end of the decade, electric vehicles capable of traveling more than 300 miles on a charge would cost the same as or less than similar cars with combustion engines.
Batteries that can charge in minutes and let a vehicle travel 600 miles on a charge are edging closer to reality. BMW said this week that it had begun testing a prototype equipped with an advanced battery developed by Solid Power, a Colorado company. The technology, known as solid state, allows cars to be charged faster and travel farther. Mercedes-Benz has been testing a similar technology.
Still, the United States trails far behind other countries in electric vehicle sales. Chinese drivers bought 3.3 million from January through April, a 35 percent increase from a year earlier, according to Rho Motion, a research firm. Europeans bought 1.2 million, a 25 percent rise.
In North America, sales in the first four months came to 600,000, a 5 percent increase.
Lower sales would mean fewer Americans employed in the production of electric vehicles, batteries and charging equipment. The International Council on Clean Transportation estimates that if left in place, the Inflation Reduction Act would create 118,000 jobs through 2030. All those jobs, plus 12,000 more, will be lost if the legislation is repealed, according to the council’s research. Michigan, Texas and Tennessee would suffer the biggest job losses.
“The I.R.A. said ‘yes’ to American manufacturing and American jobs,” said Peter Slowik, one of the authors of the council’s study. “Now we’re taking that away.”
Of course, the bill could change significantly in the Senate, where some Republicans have expressed reservations about a wholesale repeal of the Inflation Reduction Act. Much of the money from that law is going to states where majorities voted for Mr. Trump.
But the politics of tax and clean energy policy are complicated. More than a dozen Republican representatives whose districts include factories that benefit from subsidies had said they would not support eliminating those subsidies. Yet just two Republicans voted against the House bill after Mr. Trump pressured representatives to advance his agenda.
“You’d really need to be sticking your neck out to kill this big bill,” said Alexander Gazmararian, an assistant professor of political science at the University of Michigan who has studied the politics of clean energy investment.
Also on Thursday, Senate Republicans used an unusual legislative tactic to block California’s plan to phase out fossil fuel cars by 2035. Eleven other states had intended to follow California; together, the dozen account for about 40 percent of the U.S. auto market. The Trump administration is also planning to roll back Biden-era fuel emissions and efficiency rules.
Raw Materials
The House tax bill’s changes would undercut new factories and mining projects by quickly phasing out incentives to manufacture batteries and mine and refine raw materials like lithium.
Credits would expire in two years for projects that used Chinese know-how. It is very difficult for battery makers and mineral refiners not to use some Chinese technology, industry representatives said.
“This bill as currently written would be devastating for critical mineral production and refining in the U.S.,” Albert Gore III, executive director of the Zero Emission Transportation Association, told reporters this month.
Low prices are the biggest problem for lithium producers right now, said Keith Phillips, the chief executive of Piedmont Lithium, which is developing a mine in North Carolina.
“Prices are going to have to rise before the project would become economic,” he said. But if the federal tax credits are eliminated, Mr. Phillips added, “they will have to rise that much more.”
The legislation would be a setback for a factory that Ford Motor is building in Marshall, Mich., with technical expertise from CATL, a Chinese company that is the world’s largest maker of electric vehicle batteries. The factory will produce batteries that are significantly less expensive than other batteries made in the United States.
“The production tax credit spurred American investments and jobs, which could now be at risk,” Ford said in a statement.
Cutting the United States off from Chinese technology could make it harder for U.S. automakers to compete, said James Bowe, a partner at the law firm King & Spalding who advises clients in the energy industry.
“Restraining the ability to take advantage of technological innovations, no matter where they’re sourced, is a potentially crippling thing for U.S. innovation,” Mr. Bowe said. “We can learn from others as they learn from us.”
The Trump administration has held back $7.5 billion for charging infrastructure, and the legislation would eliminate tax credits for people and businesses that installed chargers.
But the electric vehicle industry was growing before the Inflation Reduction Act and can survive without government help, said Levi McAllister, a partner at the law firm of Morgan Lewis who represents automakers and others in the industry.
Companies designed their business plans with an awareness that subsidies could disappear someday, Mr. McAllister said, adding, “Everybody who was active in this industry knew which way the wind was blowing.”
Jack Ewing covers the auto industry for The Times, with an emphasis on electric vehicles.
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