How Republican Policies to Kill EV & Solar Incentives Could Lead to More EV & Solar Sales — With 1 Critical Component

We’ve covered how Republicans in Congress and Donald Trump have killed key electric vehicle (EV) and solar subsidies that were put in place in 2022 via the Inflation Reduction Act. Removing these incentives, the electric vehicle and solar industries in the United States are likely to see their growth slow down, with the US falling further behind Europe and China as a result. However …

… it crossed my mind while listening to a webinar about how the solar tax credit will be phased out that these policy changes could end up leading to faster growth in these sectors. Let me explain. And note that there is one critical thing that has to happen down the road in order for this to make the most sense.

In the case of solar power, projects that will be put in place in 2025 will still qualify for the investment tax credit. So, without a doubt, there’s going to be a rush of projects getting installed or at least making significant progress toward installation in 2025. (Note that there are also ways for a project to still qualify after 2025 if enough progress is made on it and certain requirements are met.) As with other incentive phaseouts, the market will surge before the incentives actually go away.

It’s a similar, but more severe, thing with electric vehicles. The $7,500 tax credit is gone after September 30. Presumably, that will lead to a surge in EV purchases in this quarter, and then a drop-off after that.

Before I go further, let me get to the critical thing that has to happen down the road for this to really be a positive story. Democrats have to retake Congress and the White House. Democrats have to win back political power and revive the tax credits down the road.

Okay, with that important caveat out of the way, how does this temporary removal of subsidies help these industries? Here are the key ways it helps the EV industry:

• It brings attention to the market and stimulates a rush in EV purchases, well beyond what would have occurred with the tax credit.
• After subsidies are removed, it makes automakers cut costs and get more competitive in order to make sales in a tougher market.
• Down the road, when (if) incentives are brought back (by Democrats, of course), automakers won’t raise prices, or at least not that much, and the cost cutting will have helped the market.
• Additionally, a new era of subsidies will bring attention to the topic and the EV market again.

Each of these steps, presuming they are true, will accelerate the transition to electric vehicles in the United States. And it’s a similar possibility with the solar market. Raised awareness of incentives —> cost cutting —> a revival of incentives that raises awareness again. That’s potentially better than subsidies that hang around for years and get a bit forgotten.

Of course, it all hinges on bringing subsidies back eventually. That’s the tricky part. But let’s dream, and then work to make those dreams a reality.

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