Trump made a decision that was unfavorable to Elon Musk.

The U.S. Congress has officially passed the Office for Public Spending and Tax Cuts (OBBBA), dubbed the "big, beautiful bill" proposed by President Donald Trump.

One of the most controversial aspects of this legislation is the complete termination of electric vehicle incentives from the previous administration of President Joe Biden, creating major changes in the American automotive industry.

Under current policy, consumers switching to electric vehicles can benefit from tax credits of up to $7,500 for new cars and $4,000 for used cars. This is one of the main drivers behind the shift of American consumers from gasoline to electric vehicles in recent years.

The $7,500 electric vehicle tax credit policy has a long history dating back to 2008. Initially, the program was designed with a limit of 200,000 vehicles per manufacturer, aiming to encourage automakers to invest in electric vehicle technology without creating an excessive budgetary burden.

However, according to newly approved regulations, this electric vehicle incentive program will officially expire on September 30th. The $4,000 credit for used electric vehicles, a policy that has played a significant role in boosting green vehicle sales in recent years, will also be completely eliminated.

Previously, the Republican-controlled US House of Representatives also passed a controversial proposal to impose an annual fee of $250 on electric vehicle owners to offset the cost of maintaining transportation infrastructure. The reason given was that electric vehicles do not use gasoline and therefore do not contribute to gasoline taxes used for road maintenance.

However, this fee was removed from the official law passed by Congress, possibly due to pressure from lobbying groups and concerns about the backlash from electric vehicle users.

Impact on the electric vehicle industry

The cancellation of the incentive policy is expected to have a far-reaching impact on the entire electric vehicle supply chain in the US. Electric vehicle manufacturers such as Tesla, GM, Ford, and many others may have to adjust their business strategies and pricing to remain competitive.

At the same time, suppliers of batteries, components, and electric vehicle charging services may also be negatively impacted by declining market demand. This could slow down the development of electric vehicle charging infrastructure nationwide.

The Electrification Alliance, an electric vehicle advocacy group, has expressed deep concern about the repeal of this incentive. The organization argues that the Trump administration's move will severely undermine the competitiveness of the US EV industry, especially in the context of China's strong rise in the global electric vehicle market.

As electric vehicles gain an increasingly larger share of the global automotive market, the future of transportation clearly belongs to electrification. This bill means the US is ceding its leadership role to China, the group warned in a public statement.

A Harvard University study published in March presented a worrying forecast about the impact of repealing this policy. According to the study, if the electric vehicle tax credit is removed, the rate of electric vehicle adoption in the US could fall by 6% by 2030.

However, this move also brings financial benefits to the federal government, saving approximately $169 billion over the next 10 years.

According to Dan Levy, an automotive market analyst at Barclays, the end of the electric vehicle tax credit in less than three months could lead to an interesting phenomenon in the market. He predicts a wave of early purchases from consumers to take advantage of the tax policy before it expires.

Levy believes that easing both the stick and the carrot will slow the pace of the shift to electric vehicles in the U.S. After a period of surged purchases, the market could see a significant drop in sales in the coming period.

Benefits for gasoline car manufacturers

In addition to eliminating incentives for electric vehicles, the new law also significantly benefits traditional automakers by abolishing penalties for those failing to meet the fuel efficiency standards set by CAFE (Corporate Average Fuel Economy).

This change will make it easier for manufacturers to produce more gasoline-powered vehicles without worrying about penalties.

Over the years, many major automakers have been fined large sums for failing to meet fuel efficiency standards. Last year, Chrysler's parent company, Stellantis, was fined $190.7 million for failing to meet standards during the 2019-2020 period.

Stellantis Corporation was also fined nearly $400 million between 2016 and 2019 for similar reasons. General Motors (GM) also did not escape fines, having to pay $128.2 million in penalties for 2016-2017 for failing to meet prescribed fuel efficiency standards.

The abolition of these penalties is seen as a major boon to the traditional automotive industry, allowing them to focus on producing more profitable vehicles without worrying about fuel consumption constraints.