US Tax Credits for Electric Vehicles Set to Expire on Sept. 30: What It Means for Manufacturers and Investors

The US tax credit for electric vehicles (EVs) is set to expire on Sept. 30. This credit can be worth up to $7,500 for new EVs and $4,000 for used EVs. Only 20 new vehicle models qualify for the credit, and manufacturers like Tesla, General Motors, and Ford have eligible models. The credit helps EVs compete with mid-priced gasoline vehicles. The expiration could have a significant effect on EV manufacturers, but its impact will depend on the specific vehicles and manufacturers involved.

The expiration of the US tax credit for electric vehicles (EVs) on September 30, 2025, is set to significantly affect the EV market. The tax credit, which can be worth up to $7,500 for new EVs and $4,000 for used EVs, has been a crucial factor in driving EV adoption. However, with the credit set to expire, the impact on EV manufacturers and the market as a whole remains uncertain.

The tax credit has helped EVs compete with mid-priced gasoline vehicles by making them more affordable. However, the expiration will only affect a limited number of vehicles. Only 20 new vehicle models qualify for the credit, and many configurations of these models do not meet the eligibility criteria. For instance, Tesla's Model X only qualifies with an MSRP of $80,000 or below. Other manufacturers like Lucid, BMW, and Mercedes do not have any models that qualify for the credit [1].

The impact on EV manufacturers will vary. Companies with models that qualify for the credit, such as Tesla, General Motors, and Ford, may experience a sales dip. However, the gap between the average cost of an EV and a gas-powered vehicle has narrowed in recent years, which could mitigate the impact. On the other hand, luxury brands like Lucid, which do not qualify for the credit, may see a net positive effect as buyers consider them more than they otherwise would [1].

The expiration of the tax credit has already led to a spike in EV sales. In July 2025, more than 130,000 new electric vehicles were sold, the second highest total for a single month ever, and 36,700 used electric vehicles changed hands, which was the highest number on record [1].

The IRS has also tweaked the tax credit expiration deadline to allow buyers who pay for their new electric car in the current quarter to receive the credit. This means that even a small down payment or trade done before the end of the quarter will qualify the buyer for the credit [2].

Despite the federal credit's expiration, states like California are considering local incentives to replace the program. California's Governor Gavin Newsom has signed an executive order to move to state-funded EV and clean energy subsidies, compensating for the loss at the federal level. This could help maintain EV sales and adoption in the state [2].

In conclusion, the expiration of the US EV tax credit will have a significant impact on the industry, but the extent of this impact will depend on the specific vehicles and manufacturers involved. While some manufacturers may experience a sales dip, others may see a net positive effect. Additionally, state-level incentives could help mitigate the impact of the federal credit's expiration.

References:
[1] https://www.fool.com/investing/2025/08/24/all-electric-vehicle-investors-need-to-mark-their/
[2] https://www.notebookcheck.net/IRS-tweaks-Tesla-Model-Y-tax-credit-expiration-deadline-as-California-mulls-federal-subsidy-compensation.1094783.0.html