Federal Government Doing All It Can to Give EVs the Electric Chair
Highlights (really lowlights) of what came out of the Ways and Means Committee
- EV purchase incentives will mostly end after this year. This applies to all forms of acquisition – purchase or lease, individual consumer or commercial, new or used.
- The purchase incentive will continue for one more year in a very attenuated form. Manufacturers that have sold fewer than 200,000 vehicles as of the end of 2025 will be eligible for this grace period. The fine print is not clear with respect to whether the MSRP, income, battery sourcing or final assembly requirements will be kept or modified. We also do not know if the 200,000 limit applies to total sales or incentive-eligible sales.
- The Advanced Manufacturing Tax Credit (45X) remains in force, though there will likely be restrictions about the use or licensing of Chinese tech. That has been the word anyway. It is hard to completely divorce the discussion of IRA incentives from tariffs, and with negotiations underway with China, things could change.
A few observations:
- The 200,000 limit harkens back to the manufacturer cap in the pre-Inflation Reduction Act (IRA) EV incentive. The companies that jumped into the deep water first, like Tesla and General Motors, were the first to lose out. Many others were on the verge of losing their eligibility when the IRA came along and did away with it.
- There has never been a robust availability of vehicles meeting the ever-escalating IRA sourcing and assembly requirements. It was expected that it would take time to re-orient a supply chain that is heavily China-centric and for recycled battery materials to be available in sufficient quantities. This was ameliorated to a fairly significant degree by the exclusion of commercial transactions from the restrictions and the classification of consumer leasing as a commercial transaction.
- The design of the IRA with both push and pull incentives was succeeding in bringing manufacturing jobs to this country. Atlas Public Policy has written that “As of early 2025, it has helped spur $41.7 billion in announced investment and more than 72,000 jobs across 18 active facilities, with another $20.2 billion and 19,600 jobs planned.” The majority of these investments are in red districts. They note that these numbers likely undercount the full supply chain impact and conclude that, “Overall, the New Clean Vehicle Tax Credit is critical to sustaining U.S. competitiveness in the global EV market and ensuring the long-term vitality of American manufacturing.”
- It is likely that without the purchase incentives, never mind tariffs, many of these proposed investments will not materialize.
Other Items Not Part of Reconciliation
- The EPA has been directed to roll back federal fuel-efficiency standards.
- Congress is looking at passing a law to do away with the waiver that California has to create its own, more stringent standards. (CT has followed CA standards but that will end after this year.)
- There is also an attempt being made in Congress to impose a $1000 fee on every EV purchase (somewhat similar to what a number of states are doing).
- NEVI funds for charging infrastructure are frozen. According to the Batteries Included YouTube/podcast channel, funds were even frozen for projects with signed contracts that were underway. The CT Department Of Transportation confirmed that funds are no longer flowing to this state. NEVI was part of the Bipartisan Infrastructure Investment and Jobs Act. (Several states filed a lawsuit in federal court in Seattle on May 5, 2025. This was an illegal impoundment of Congressionally authorized funds.) As we have seen across the board, these funding freezes have been abrupt and have not concerned themselves with legal niceties.
What Happens Next
This bill or something like it may yet happen but there are still hurdles to jump, including passing the full House. There are red state legislators who don’t want to lose these IRA jobs. There are ongoing negotiations with the SALT Caucus which had demanded an increase in the cap of over four times the amount included in the bill. And, well, Medicaid and SNAP to mention two others. The bill can only afford 3 defections.
The bill has to then clear the Senate and Bloomberg News reported that 4 Republican Senators wrote a letter to leadership advocating to keep the IRA incentives. And then it has to be deemed in compliance with the requirements for a reconciliation bill, though several senators have opined that they may just change the rules.
This is more or less where we expected to be: A protracted budget reconciliation process that kills much environmental protection, clean energy and transportation, and new tech manufacturing support that has to be passed by the slimmest of majorities.
All of the bills and rule-making are partisan (with the partial exception of the waiver). It is a shame that EVs and climate science are now part of the culture war. It is highly unlikely that any of the Connecticut delegation in the US Congress will vote in favor of any of this. We are left to act at the state level, support advocacy organizations with national reach, and by voting with our feet and buying EVs. EVs may be an excellent choice for consumers but policy matters and the EV growth curve will be impacted.
The American Lung Association has just released its State of the Air 2025 Report. It’s as bad for CT as you think it is.