US electric vehicle tax breaks will expire on Sept. 30

By David Shepardson

July 3 (Reuters) - It is the end of the line for U.S. electric vehicle tax credits.

Sweeping tax and budget legislation approved by Congress on Thursday means $7,500 tax credits for buying or leasing new electric vehicles will end on September 30, as well as a $4,000 used EV credit, that have helped juice green vehicle sales in recent years.

The Electrification Coalition, an EV advocacy group, said on Thursday "as EVs secure a growing share of the global automotive market, it is obvious that the future of transportation is electric; this bill forfeits America’s role in that future to China."

Congress first approved a $7,500 EV tax credit in 2008 that it phased out after manufacturers hit 200,000 vehicles. The credit was expanded in 2022 to cover leased vehicles and the per manufacturer cap was lifted.

Separately, U.S. automakers stand to receive significant benefits from the final bill that eliminates penalties for failing to meet Corporate Average Fuel Economy shortfalls. The measure makes it easier for automakers to build gas-powered vehicles.

Barclays auto analyst Dan Levy said the tax credit phase-out in less than three months means EV sales will significantly jump via a "pre-buy" since some consumers will move up purchases planned for later with sharp declines in the

months to follow.

"We believe the bill reiterates the slowdown ahead for EV penetration in the U.S., with both the 'carrot' (i.e. tax credits/incentives) and the 'stick' (i.e. emissions regulations) softened," Levy wrote in a research note.

A Harvard University study released in March forecast that ending the EV tax credits would reduce EV penetration by 6% by 2030 and would save the government $169 billion in EV tax credits over a decade.

Last year, Chrysler parent Stellantis STLAM.MI paid $190.7 million in civil penalties for failing to meet U.S. fuel economy requirements for 2019 and 2020 after paying nearly $400 million for penalties from 2016 through 2019. GM previously paid $128.2 million in penalties for 2016 and 2017.

In the final bill, Congress dropped a planned $250 annual fee for EVs to pay for road repairs, as well as a requirement that the U.S. Postal Service sell off its EV delivery vehicles.