Sales of electric vehicles have been rising in recent years, partly because of a $7,500 tax credit from the federal government that helps lower the cost of buying one.
But a budget bill that House Republicans released on Monday would end that tax credit. Their proposal would also put new restrictions on other tax breaks that have encouraged automakers to invest tens of billions of dollars in new battery plants in the United States.
By next year, the bill would do away with the $7,500 tax credit for buyers of new electric vehicles and a $4,000 credit that can be applied to the purchase of used electric cars and trucks.
If signed into law, the change is likely to increase electric vehicle sales in the coming months as consumers race to take advantage of the tax credit before it goes away. But sales are likely to slow or fall once the credits end, analysts said.
“It’s definitely going to impact adoption and slow it down significantly,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive, a research firm.
Cox expects electric vehicles to make up 10 percent of all new vehicle purchases this year. If Congress makes no changes to the tax credits, that number should climb to almost a third by 2030, the firm estimates.
But if Congress repeals the credits, Ms. Valdez Streaty said, she expects electric vehicle sales to make up 20 to 24 percent of new car sales by 2030.
Losing the credits would deal another financial blow to automakers facing higher costs because of President Trump’s 25 percent tariffs on imported cars and auto parts.
The Republican tax proposal would hurt many automakers that have been racing to introduce new models. General Motors and Ford Motor may be hit particularly hard. Both have invested heavily in factories and supply chains with the hope of eventually producing millions of electric vehicles a year.
G.M. has opened two battery plants, in Ohio and in Tennessee. The company built them through a joint venture with LG Energy Solution. Ford has three battery plants under construction — a wholly owned factory in Michigan and two in partnership with a South Korean company, SK On, in Kentucky and in Tennessee.
Both Detroit automakers have also invested in mining operations to secure domestic supplies of lithium, a key material for batteries.
Tesla, the largest seller of electric vehicles in the United States, will also be hurt. The company’s sales have been sliding in recent months because it hasn’t introduced new, more affordable models and because of a consumer backlash to its chief executive, Elon Musk, who has taken a prominent role in the Trump administration.
But Tesla has some advantages. While most automakers are still losing money on electric cars, Tesla has been making money on them for years. As a result, it might have more financial leeway to lower prices to prop up demand if the credits end. The company also relies less on imported parts than other U.S. automakers.
Other large automakers have been racing to catch up to Tesla in electric vehicles, including by building many new factories, mostly in states that have elected many Republican lawmakers.
Toyota has built a battery plant in North Carolina. Hyundai has started making electric vehicles at a plant in Georgia and plans to produce batteries there. Stellantis and a partner have two battery plants under construction in Indiana. The states hosting these plants have been counting on them to create thousands of well-paying jobs.
If the tax rules change significantly, automakers could scrap, scale back or delay their plans.
“If the government wants the U.S. to compete with China and the rest of the world in the inevitably large E.V. market, and wants G.M. and Ford to make large, long-term investments in E.V. development and U.S.-based production, it needs to extend the tax credit and wall it off from doctrinaire whiplash,” said Erik Gordon, a business professor at the University of Michigan who follows the auto industry.
China is the world’s largest producer of electric vehicles and is the most important source of critical materials for batteries and electric motors, such as processed lithium and rare earth minerals. The elimination of the tax credits would make it much harder for the U.S. auto industry to catch up.
“What this does globally to the U.S. auto industry and its ability to compete — I think it’s going to hurt us,” Ms. Valdez Streaty said. “I think it’s going to slow us down, and we are already behind China.”
Ford and Stellantis declined to comment, as did the Alliance for Automotive Innovation, a policy group.
The federal government began offering the $7,500 credit under President Barack Obama, and it stayed in place during President Trump’s first term. The credit was renewed and expanded in the Inflation Reduction Act that President Joseph R. Biden Jr. signed into law.
Because electric vehicles are more expensive than internal-combustion vehicles, the credits have been essential in getting more people to buy them.
The credit is available on sport utility vehicles and pickup trucks that sell for $80,000 or less and sedans that cost no more than $55,000. Cars have to be assembled in North America, and their batteries must meet requirements on which countries their battery materials come from. To qualify, individual buyers have to earn no more than $150,000 a year and couples no more than $300,000.
Many of those conditions do not apply to leased vehicles. But the tax credit on those cars and trucks goes to the company that leases the car to individuals, which is typically the finance arms of automakers. Many leasing firms have been passing the savings to their customers, a practice that has led to a sharp rise in leasing of electric vehicles.
About 595,000 electric vehicles were leased in 2024, Ms. Valdez Streaty said, up from about 96,000 in 2022 before the leasing incentive was available.
