EV Update: Will The Market Survive The Expiration Of The Federal Tax Credit?

How quickly things change.  

It was barely more than a year ago that climate activists and federal bureaucrats thought they had maneuvered the internal combustion engine (ICE) automobile to the brink of extinction.  ICE vehicles had become like dinosaurs, inferior to their new competitors the EVs, and therefore headed for the scrap heap of history.  Customers were flocking to the trendy new EVs, which were seeing rapidly rising sales.  

And the all-powerful federal bureaucracy was going to give the final push to put ICE vehicles out of their misery.  On June 7, 2024 President Biden’s National Highway Traffic Safety Administration had issued a final rule (“Corporate Average Fuel Economy [CAFE] Standards for Passenger Cars and Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond”) jacking up mandatory average vehicle mileage to 50+ [mpg] as of 2031, with further increases to follow from there.  Since no ICE vehicles bigger than a baby carriage could achieve that mileage, the only path forward for vehicle manufacturers would be rapid conversion to making only EVs.  NHTSA’s mileage rule had also quickly followed an equally draconian mandate from EPA, finalized on April 18, 2024 (“Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles”) setting strict and declining limits for CO2 emissions that no ICE vehicles would be able to meet by the early 2030s.  And meanwhile, 2022’s Inflation Reduction Act had extended a $7500 tax credit to buyers of new EVs through December 31, 2032.

So all the pieces were in place.  By some time in the early 2030s, it would be effectively illegal to sell new ICE cars, and they would be rapidly disappearing from the roads.

Well, not so fast.  Suddenly, the rapid advance of the EV may have stalled out completely.  The federal regulators have reversed their direction.  And customer preferences seemingly favorable to EVs may turn out to evaporate as soon as federal tax benefits end, an event now just a couple of months away.