President-elect Donald Trump’s transition team is exploring a series of steps to make it more difficult for electric vehicles to be competitive with gasoline-powered ones, culminating with the elimination of a $7,500 tax credit for people who buy EVs, according to three people with direct knowledge of the plans.

Harold G. Hamm, an oil billionaire, has been discussing the $7,500 credit with the Trump transition team. Hamm is the founder and chair of Continental Resources, one of the country’s largest independent oil companies. The growth of electric vehicles poses a threat to the oil and gas industry. According to the International Energy Agency, the global rollout of electric vehicles could reduce oil demand by nearly 6 million barrels a day by 2030.

The electric vehicle tax credit is disliked by another Trump associate, Elon Musk, who owns Tesla. He said in July that getting rid of the tax credit would hurt Ford, GM and other competitors to Tesla.

Trump cannot unilaterally eliminate the electric vehicle tax credits. That’s because they are part of the Inflation Reduction Act, which President Joe Biden signed into law in 2022. Congress would have to amend it or pass a new law to erase the credits.

If you’ve had an electric vehicle on your Christmas list and were hoping to use the tax credit, political observers said it would be wise to buy before January, given the uncertainty around its durability.

Here are five things to know about electric vehicle tax credits.

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How EV Tax Credits Work

Under the law, consumers can lower the purchase price of an electric, plug-in hybrid or fuel cell vehicle by up to $7,500 for a new vehicle and up to $4,000 for a used one. There are some restrictions. To qualify, buyers must purchase the vehicle for their own use, not resale.

The credit is available only to taxpayers whose modified adjusted gross income does not exceed $300,000 for married couples filing jointly; $225,000 for heads of households; or $150,000 for single filers.

The vehicle must be assembled in North America, and its batteries must also be built in North America. It must also meet sourcing requirements for lithium and other crucial minerals.

The Biden administration has created a website that lists eligible makes and models.

What Musk Wants

Musk, the world’s richest man, CEO of Tesla and one of Trump’s biggest supporters, wants electric vehicle tax credits to be eliminated.

Unlike its competitors like Ford and GM, Tesla does not rely heavily on the tax credits. Some Tesla models do not qualify for them because of several requirements, including that the vehicles be free of Chinese-made components. Tesla also has had an enormous head start in production and built an expansive network of charging stations, giving it a greater market appeal than its competitors, analysts have said.

“I think it would be devastating for our competitors and for Tesla slightly,” Musk said in an earnings call in July, during which he speculated about the impact of the tax credits ending. “But long-term probably actually helps Tesla, would be my guess.”

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Reuters first reported that Trump planned to end the electric vehicle tax credit, with support from Tesla representatives.

Musk has expressed a general distaste for government subsidies, although Tesla has benefited from billions of dollars in carbon credits, electric vehicle tax credits and a $465 million Department of Energy loan to produce specially designed, all-electric plug-in vehicles.

“Take away the subsidies,” Musk wrote on X, his social media site, in July. “It will only help Tesla. Also, remove subsidies from all industries!”

What Other Automakers Want

The Alliance for Automotive Innovation, which represents 42 car companies that produce about 97% of new vehicles in the United States, wants to keep consumer tax credits for EVs.

In a letter to Republican lawmakers who will be writing tax legislation, the organization said the credits were key to maintaining competitiveness.

Economists have argued that eliminating the EV tax credit and other parts of Biden’s climate policies would end up helping China by jeopardizing hundreds of billions of dollars in manufacturing investments that have been made in the United States and sending that work to other countries, including China.

Jennifer Granholm, Biden’s energy secretary, said the United States has been trying to build up a domestic supply chain for batteries and electric vehicles since the passage of the climate law.

“You eliminate these credits, and what do you do?,” she said. “You end up ceding the territory to other countries, particularly China.”

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So Why Target EVs?

Electric vehicles are now thoroughly embedded in America’s culture wars.

At the start of his presidential campaign, Trump seized on electric vehicles as a kind of stand-in for Biden’s climate policies as he bashed them for being expensive and ineffective. Other Republicans took his cue and attacked both battery-powered vehicles and the people who promote them.

“Democrats like Pete Buttigieg want to emasculate the way we drive and force all of you to rely on electric vehicles,” Rep. Marjorie Taylor Greene, R-Ga., said at a Trump rally in Detroit last year.

Buttigieg, the transportation secretary, is gay and the word choice struck many observers as an attempt to question his masculinity — and by extension, the masculinity of anyone not driving a car that does not have a combustion engine.

Hamm has dismissed EVs as “virtue cars.”

Late in the campaign, as Trump grew closer to Musk, Trump’s stance softened a bit. “I’m constantly talking about electric vehicles but I don’t mean I’m against them — I’m totally for them,” Trump said at a rally in July. “I’ve driven them and they are incredible, but they’re not for everybody.”

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How Can Trump End the Tax Credits?

While he waits for Congress to erase the tax credits, once in office Trump can make it harder for consumers to access and use the money.

His administration can issue new guidance that eliminates the tax credit for leased electric vehicles.

“That’s probably fait accompli, because all it takes is a call from the White House,” said Mike Murphy, a veteran Republican operative who supports electric vehicles.

He said because a large number of electric vehicle sales are to companies that lease them, axing the provision would “quickly pour ice-cold water on new EV sales.” The new administration also could take down websites that inform consumers about how to use the credit, sowing confusion.

Lawmakers are expected to use reconciliation, a parliamentary maneuver that allows taxing and spending bills to pass with a simple majority. It is same legislative tactic that Democrats used to muscle through the IRA with no Republican votes.

“They’re going to move fairly quickly, I’m told,” said Thomas J. Pyle, president of the American Energy Alliance, a conservative energy research group, of Republicans. He predicted a “monster” budget bill that will aim to cut the electric vehicle tax credits as well as subsidies for wind, solar and other clean energy in order to make way for Trump’s next round of tax cuts.

“President Biden set the precedent for this,” Pyle said. “There’s nothing the Democrats can do or say about that. The question is how unified the Republicans will be, and I suspect they would be in the beginning to give Donald Trump his honeymoon.”

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This article originally appeared in The New York Times.

By Lisa Friedman/Lauren Justice
c. 2024 The New York Times Company