Key Points:
Economists predict 317,000 fewer annual EV registrations if the $7,500 tax credit is removed.
Gasoline consumption would see a marginal increase of 155 million gallons in the first year.
Morgan Stanley projects a slowdown in EV adoption but not a complete halt.
The potential elimination of the $7,500 federal tax credit for electric vehicles (EVs) could significantly impact future demand, cutting registrations by as much as 27%, according to research by economists Joseph Shapiro of UC Berkeley and Felix Tintelnot of Duke University. This would equate to 317,000 fewer EVs registered annually compared to projections with the tax credit in place.
Reports that President-elect Donald Trump may move to repeal the credit, a key component of the 2022 Inflation Reduction Act, have already weighed on US auto stocks. However, the overall effect on gasoline consumption would be minimal. Shapiro and Tintelnot estimate an increase of just 155 million gallons in the first year, with a decade-long rise of 7 billion gallons—representing only about 5% of the 136 billion gallons typically consumed annually in the US.
While the credit's removal would slow EV adoption, it would not halt it entirely, according to Morgan Stanley analyst Adam Jonas. In a recent research note, Jonas acknowledged the potential disruption but emphasized the long-term trajectory remains positive. “A slowdown in adoption could allow legacy automakers to bridge the gap, but we still anticipate growing EV penetration driven by innovation and economies of scale delivering lower costs and higher-performing vehicles,” he wrote.
Despite the uncertainty surrounding policy changes, analysts remain confident that the transition to EVs will continue, albeit at a potentially slower pace.
Economists predict 317,000 fewer annual EV registrations if the $7,500 tax credit is removed.
Gasoline consumption would see a marginal increase of 155 million gallons in the first year.
Morgan Stanley projects a slowdown in EV adoption but not a complete halt.
The potential elimination of the $7,500 federal tax credit for electric vehicles (EVs) could significantly impact future demand, cutting registrations by as much as 27%, according to research by economists Joseph Shapiro of UC Berkeley and Felix Tintelnot of Duke University. This would equate to 317,000 fewer EVs registered annually compared to projections with the tax credit in place.
Reports that President-elect Donald Trump may move to repeal the credit, a key component of the 2022 Inflation Reduction Act, have already weighed on US auto stocks. However, the overall effect on gasoline consumption would be minimal. Shapiro and Tintelnot estimate an increase of just 155 million gallons in the first year, with a decade-long rise of 7 billion gallons—representing only about 5% of the 136 billion gallons typically consumed annually in the US.
While the credit's removal would slow EV adoption, it would not halt it entirely, according to Morgan Stanley analyst Adam Jonas. In a recent research note, Jonas acknowledged the potential disruption but emphasized the long-term trajectory remains positive. “A slowdown in adoption could allow legacy automakers to bridge the gap, but we still anticipate growing EV penetration driven by innovation and economies of scale delivering lower costs and higher-performing vehicles,” he wrote.
Despite the uncertainty surrounding policy changes, analysts remain confident that the transition to EVs will continue, albeit at a potentially slower pace.