Tightening Margins During Summer: Prices Diverge, Causing Pressure
The One Big Beautiful Bill Act (OBBBA), recently passed in the United States, is set to reshape the electric vehicle (EV) sector with far-reaching consequences. The legislation's provisions touch upon production, incentives, and consumer demand in various and interconnected ways.
One of the most significant changes concerns incentives. The OBBBA immediately terminates federal tax credits for new and used EVs, commercial EVs, and even leases, seven years earlier than under the previous law. This includes the elimination of a loophole that had boosted leasing to about two-thirds of recent EV sales. Moreover, tax credits for installing EV charging stations at homes and businesses will expire on June 30, 2026, and the 45X tax credit, which supported domestic battery cell and module production, has been repealed.
These changes are causing uncertainty among major automakers, with some projects paused or delayed. Ford, Stellantis, and even Tesla are reassessing their EV production and investment timelines. The loss of manufacturing incentives is causing battery suppliers to slow or shelve U.S. production plans, potentially ceding market share to Chinese and Korean competitors. Furthermore, the policy uncertainty is discouraging long-term research and development in batteries, recycling, and grid integration, where the U.S. had been making gains.
The impact on consumer demand is expected to be significant. With the removal of up to $7,500 in tax credits per vehicle, EVs become more expensive at purchase. Combined with existing concerns about insurance, maintenance, and charging infrastructure, this is likely to dampen consumer demand. The administration’s policy shift emphasizes consumer sovereignty and free market dynamics, arguing that consumers, not government mandates, should determine which vehicles succeed. This departure from previous policies that aimed to accelerate EV adoption through incentives is projected to lead to tens of millions fewer EVs sold in the U.S. over the next decade.
Industry analysts predict a shift toward internal combustion, hybrid, or future alternatives in the short to medium term. However, with the right product mix, dealer training, and consumer messaging, there's still room to profit—especially for those who can adapt quickly. Tim Pohanka, a veteran dealer, believes the recent policy pivot under the OBBBA may allow the market to steer the EV conversation.
Manheim, an industry leader, is investing in battery lifecycle management, repair services, and reconditioning tools for both OEMs and dealers. Karl Brauer, executive analyst at iSeeCars, expects a race to buy EVs before the September 30 EV tax incentive deadline, followed by a potential decline in interest.
The average transaction price for a new electrified vehicle in June was $56,910, down from $57,236 in May and 2.8% lower than a year ago. The average transaction price for a new vehicle in June was $48,907, up 0.4% from May and 1.2% higher than a year ago. New-vehicle manufacturers' prices rose to $51,124 in June, up 2.3% from the previous year.
Notably, the last new vehicle transacting under $20,000, the Mitsubishi Mirage, has been discontinued. Fewer than 1,700 units of the Mitsubishi Mirage remain available nationally and are expected to vanish by the end of summer. The average price of used EVs is expected to surge, as a million EVs were sold last year and another million is expected this year.
Independent dealers face challenges without access to EV reconditioning or charging capabilities. The OBBBA's changes could lead to a shift toward hybrid vehicle production, as a $10,000 annual tax deduction on qualifying auto loans may help the EV market maintain some equilibrium. Moreover, the introduction of new federal and state EV ownership fees will change the cost equation.
In conclusion, the OBBBA marks a dramatic reversal in federal support for the EV sector. By rescinding critical incentives, it disrupts domestic production and battery supply chains, increases costs for consumers, and is expected to slow the growth of the U.S. EV market. This policy shift—emphasizing market forces over regulation—carries significant implications for U.S. competitiveness in the global transition to electric mobility.
- The elimination of tax credits for installing EV charging stations at homes and businesses, as well as the repeal of the 45X tax credit for domestic battery cell and module production, may slow the development of the charging infrastructure needed for the growth of the EV industry.
- The policy shift away from incentives for EVs and toward consumer sovereignty in the transportation sector could lead to less investment in the EV automotive business by major manufacturers due to uncertainties about consumer demand, financing, and domestic production.
- The changes brought about by the OBBBA could lead to increased competition in the battery recycling, grid integration, and lifecycle management sectors, as industry leaders such as Manheim invest in these areas in response to the policy shift and the likely decline in demand for new EVs in the immediate future.
