How Influential are EV Tax Credits on Vehicle Sales? Which Manufacturers Will Be Hurt Most if Tax Credit Ends?

E-Vision Intelligence Report
November 2024

Key Findings

• Federal Tax Credits Have Played a Critical Role in Consumer Decisions to Purchase an EV: Among premium brand EV owners, 64% say that tax credits and other incentives were a primary driver of their decision to purchase or lease their EV. Among mass market EV owners, 49% selected their vehicle based on tax credits and incentives. Industry-wide, 87% of all EVs purchased or leased in 2024 received the federal EV tax credit. 
• Volkswagen, Chevrolet, and Tesla Owners Most Heavily Influenced by Federal Tax Incentives: Among all EV purchase drivers, tax credits and incentive programs are the most frequently selected reason for purchase among Volkswagen (81%), Chevrolet (77%) and Tesla (72%) buyers. By contrast, just 32% of Hyundai buyers, 24% of Kia buyers, and 21% of Toyota buyers selected tax credits and incentives as a primary reason for their vehicle selection. 
• Real-World Savings Amount to $5,124 per Vehicle in 2024: On average, consumers purchasing or leasing a new EV in 2024 saved $5,124 thanks to federal EV tax incentives. That’s up from $4,302 in 2023 and $1,629 in 2022. For EV leases in 2024, the average amount claimed in federal tax incentives was $6,696, and for sales it was $4,257.

Executive Summary

President-elect Donald Trump’s transition team is reportedly planning to end the $7,500 federal Clean Vehicle Tax Credit in 2025. The subsidy, which was always meant to be temporary, was a signature component of the Biden administration’s Inflation Reduction Act and has played a key role in helping to lower EV prices and spur new sales. How will ending the subsidy affect future EV sales?

The Alliance for Automotive Innovation suggested that ending the EV tax credits would harm the auto industry, writing in a Nov. 12 letter to President-elect Trump: “To remain successful and competitive, the auto industry needs a stable and predictable regulatory environment,” adding that “these incentives help ensure the U.S. continues to lead in manufacturing critical to our national and economic security.” Tesla CEO Elon Musk told investors in a July conference call that ending the EV tax credit “would be devastating for our competitors and for Tesla slightly. But long-term [it] probably actually helps Tesla, would be my guess.” The other major EV manufacturers have yet to comment on the news.

This E-Vision Intelligence Report dives into key data points trending in each monthly JD Power EV Index update, along with other data points gathered from JD Power studies and pulse surveys, to offer a data-driven consumer perspective on the federal Clean Vehicle Tax Credit and its influence on EV purchase intent among different brands.

Majority of Premium EV Owners Factor Tax Credits into Vehicle Selection

To gauge the influence of various features and incentives on EV purchase decisions, JD Power asks respondents to its U.S. Electric Vehicle Experience (EVX) Ownership Study^SM to select primary reasons for selecting the vehicle they purchased. In the premium vehicle segment—which includes all Tesla models—64% of EV owners say tax credits and other incentives influenced their purchase decision. In the mass market segment, 49% of EV owners were influenced by tax credits and incentives. Notably, these totals are higher than even vehicle purchase prices and lease offers, which were cited as a purchase reason by just 36% of premium and 39% of mass market EV buyers.

Industry-wide, 97% of those leasing new EVs and 81% of those purchasing new EVs received the federal Clean Vehicle credit in 2024, for a total of 87% of total EV sales. That total is down from 88% in 2023 and up from 23% in 2022.

Clean Air Credit is a Big Deal for Tesla Buyers

Breaking down the data further into brand-specific results, the influence of federal tax incentives on EV purchase decision varies considerably by brand. Volkswagen tops the list of brands for which owners say tax credits and other incentives were a key reason for choosing that brand. All told, 81% of Volkswagen EV buyers chose their vehicle due in part to the Clean Vehicle Credit. Chevrolet ranks second, with 77% of buyers choosing the brand based on tax credits, followed by Tesla, with 72%. It is noteworthy that Tesla ranks highest among premium segment brands in terms of the influence of tax credits on purchase decision.

At the opposite end of the spectrum, Toyota EV buyers are least heavily influenced by tax credits and incentives, with just 21% of buyers selecting tax credits as a reason for choosing the brand. Toyota is followed by Kia with 24% and Hyundai with 32% of buyers making their vehicle decision primarily based on tax credits. It is important to note here that, to qualify for the Clean Vehicle Credit, purchased EVs must be assembled in North America (including Canada and Mexico) and at least 50% of its battery components must be produced or assembled in North America. This eliminates credits for vehicles assembled elsewhere, including popular EV models from Hyundai, Kia and Toyota. Leased vehicles, however, are not subject to the same standard, which allows auto dealers to pass along a $7,500 tax credit to all EV lessees, including those from Hyundai, Kia and Toyota.

Show Me the Money

It has been widely reported that the Clean Vehicle Credit is confusing for many consumers. While nearly all leases now receive the full credit, the requirements for a purchased vehicle to qualify include understanding where battery components are sourced and assembled, income limits of the purchaser, and several other detailed criteria. All told, 43% of EV shoppers say they would describe their understanding of current EV incentives as “vague,” “minimal” or “don’t know.” Just 17% say they have a “strong” understanding of EV incentives.

In terms of the bottom-line value of EV tax credits and incentives, the average EV lessee received $6,696 and the average EV purchaser received $4,257[1] in cash back due to the Clean Vehicle Credit in 2024. Those figures have gained steadily during the past three years.

Methodology

This JD Power E-Vision Intelligence Report is based on data and insights from the JD Power EV Index, the JD Power EV Retail Share Forecast, the JD Power 2024 U.S. Electric Vehicle Experience (EVX) Ownership Study, the JD Power 2023 U.S. Electric Vehicle Experience (EVX) Public Charging Study and the JD Power U.S. Electric Vehicle Consideration (EVC) Study. The JD Power EV Index is an analytics tool to benchmark the growing EV market in the United States. It tracks millions of data points aggregated into six categories—interest, availability, adoption, affordability, infrastructure and experience—to evaluate the progress to parity of EVs with gas-powered vehicles in the U.S. Each month, the JD Power electric vehicle practice will analyze these data points, and others to spotlight emerging trends and important shifts in consumer sentiment that are helping to define the fast-moving EV marketplace. 

Find out More

This report was authored by Elizabeth Krear, vice president, electric vehicle practice; Brent Gruber, executive director, electric vehicle practice; and Kristen Richter, senior manager, electric vehicle practice. The JD Power E-Vision initiative is a company-wide program focused on maximizing JD Power industry-leading EV data, analytics, insights and solutions. Please contact us at the numbers below to connect with the authors or to learn more about the underlying research.

Media Contacts

Shane Smith; East Coast; 424-903-3665; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

[1] Tesla Cybertruck, Polestar, and Rivian vehicles not included in this calculation.