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President Donald’s Trump’s promise to end federal electric vehicle tax credits has injected fresh uncertainty into an already complex landscape for potential electric vehicle buyers, here in Hawaii and nationwide. As someone deeply involved in EV market analysis, I see 2025 as a potentially pivotal year that could reshape America’s electric vehicle transition.

The current system, established under the Inflation Reduction Act, offers up to $7,500 in tax credits for new EVs and up to $4,000 for used ones. However, even before considering Trump’s plans to dismantle these incentives, the program faces significant hurdles in 2025 due to increasingly stringent supply chain requirements.

Starting in 2025, 60% of critical battery minerals must be sourced from the United States or free trade partners, up from 50% in 2024.

This heightened requirement poses challenges for virtually every EV manufacturer. Currently, many popular models only qualify for half the credit ($3,750) because they meet just one of two criteria — either battery component assembly or critical minerals sourcing, but not both.

Take Rivian, for example. Their R1T pickup currently qualifies for only $3,750 because while they meet battery assembly requirements, they fall short on minerals sourcing. With stricter rules in 2025, they might lose even this partial credit unless they significantly restructure their supply chain.

Tesla faces similar challenges with some models, highlighting how even the most established EV manufacturers struggle with these requirements.

These requirements are well-motivated — they’re designed to incentivize U.S. production and sourcing of these important supply chains and manufacturing technologies. That’s a laudable goal.

The used EV market presents its own complications. While the $4,000 credit for used EVs seems promising, its impact is limited by a $25,000 price cap on eligible vehicles. In today’s market, finding quality used EVs under this threshold can be difficult, rendering this credit meaningless for many buyers interested in newer used models.

Trump’s pledge to end these tax credits entirely adds another layer of uncertainty. While previous tax credit transitions have typically included grandfathering provisions, there’s no guarantee this would be the case under a new administration.

This uncertainty creates a challenging decision-making environment for both manufacturers and consumers planning purchases in 2025 and beyond.

However, focusing solely on federal tax credits misses a broader point about EV adoption. States like California continue to offer substantial incentives independent of federal policy (Hawaiʻi, unfortunately, ended its state rebate program many years ago and despite our efforts it hasn’t been renewed).

More importantly, the total cost of ownership for EVs continues to improve as battery costs decline and charging infrastructure expands. In regions with low electricity costs, like Washington state ($0.15/kWh), EVs make financial sense even without tax credits. Conversely, in high-electricity-cost regions like Hawaii ($0.45/kWh), the economics become more challenging without tax credits or state rebates.

The real sweet spot remains installing solar PV on your home and charging your EV at home. This combines the low cost of owning your own power supply with the convenience of home charging.

Psychological Damage

The real impact of potentially losing federal tax credits, at least for some states, might be more psychological than financial. These credits have served as a powerful marketing tool, drawing consumers to consider EVs even if they ultimately didn’t qualify for the full amount. Their potential removal could slow EV adoption among mainstream buyers, even as the underlying technology continues to improve.

Manufacturers face tough decisions too. Many have invested billions in retooling factories and developing U.S.-based supply chains specifically to meet IRA requirements. A sudden policy shift could leave these investments stranded, potentially slowing domestic EV production just as it’s ramping up.

As we head into 2025, potential EV buyers face a complex decision matrix. Those considering a purchase might want to accelerate their timeline to secure current credits, while others might choose to wait until market forces and policy changes settle. For manufacturers, the challenge will be maintaining momentum in supply chain reorganization while preparing for potential policy shifts.

It’s likely that the tax credits won’t be eliminated immediately after inauguration because the current system was put in place by Congress and can’t be undone by executive order. It’s more likely that Congress and Trump will take a couple of months or longer to eliminate or substantially change the current system.

To play it safe, however, and with up to $7,500 at risk, new EV buyers may want to lock in a new purchase as soon as possible.

The EV transition was never going to be simple, but 2025 is shaping up to be particularly complex. Whether federal tax credits continue or not, the fundamental factors driving EV adoption — improving technology, expanding infrastructure, and declining costs — remain in place. The question isn’t if the automotive industry will electrify, but how smooth or bumpy that transition will be.