Time to Push BEVs Ahead of Looming Loss of Tax Credit

Dealer alert: Now is the time to pull out all the stops to sell BEVs.

When President-elect Trump takes office, many believe his team plans to end the $7,500 federal Clean Vehicle Tax Credit in 2025. The subsidy was enacted as part of the Biden Admin.’s Inflation Reduction Act and was meant to be temporary. Yet, that credit has played a key role in moving battery-electric vehicles.

“As the year comes to a close, OEMs and dealers traditionally offer holiday incentives to clear out the current year’s models before the new year,” Erin Keating, executive analyst at Cox Automotive, tells WardsAuto when discussing the recently released Cox E-Vision Intelligence Report.  “This year, with the threat of changes to the federal incentives with the new administrations, customers have two reasons to lease or purchase a BEV now.”

 A recent report from Kelley Blue Book shows BEV sales in the U.S. grew by 11% year over year in the third quarter and reached record highs for both volume and market share. The report estimates 346,309 BEVs were sold in Q3 2024, a 5% increase from Q2. The BEV share of sales in Q3 hit 8.9%, the highest level recorded and an increase from 7.8% in Q3 2023.

The Cox E-Vision Intelligence Report sums up how tax credits play a role in that increase. Still, it’s important to note that a final decision about the BEV tax credit has not been made. And Tesla CEO Elon Musk, who has forged a close relationship with Trump, indicates he would oppose eliminating the tax credit.

“To remain successful and competitive, the auto industry needs a stable and predictable regulatory environment,” Musk told investors in July. “These incentives help ensure the U.S. continues to lead in manufacturing critical to our national and economic security.”

WardsAuto has written extensively about the need for dealers to help consumers save whenever they consider purchasing cars. The data from the Cox E-Vision Intelligence Report underscores that issue and adds other insights into BEV buyers’ mindsets:

Majority of Premium BEV Owners Factor Tax Credits into Vehicle Selection

In the premium vehicle segment, including all Tesla models – 64% of BEV owners say tax credits and other incentives influenced their purchase decisions. In the mass market segment, 49% of BEV owners were influenced by tax credits and incentives. Notably, these totals are higher than even vehicle purchase prices and lease offers, cited as a purchase reason by just 36% of premium and 39% of mass-market BEV buyers.

Industry-wide, 97% of those leasing new BEVs and 81% of those purchasing new BEVs received the federal Clean Vehicle credit in 2024, for a total of 87% of total BEV sales. That total is down from 88% in 2023 and up from 23% in 2022.

Volkswagen, Chevrolet, and Tesla Owners Most Heavily Influenced by Federal Tax Incentives: Tax credits and incentive programs are the most frequently selected reason for purchase among Volkswagen (81%), Chevrolet (77%) and Tesla (72%) buyers. By contrast, just 32% of Hyundai buyers, 24% of Kia buyers and 21% of Toyota buyers selected tax credits and incentives as a primary reason for their vehicle selection.

Real-World Savings Amount to $5,124 per Vehicle in 2024: On average, consumers purchasing or leasing a new BEV in 2024 saved $5,124 thanks to federal BEV tax incentives. That’s up from $4,302 in 2023 and $1,629 in 2022. For BEV leases in 2024, the average amount claimed in federal tax incentives was $6,696, and for sales, it was $4,257.