Government touts $2B in EV subsidies while automakers shift strategies

Consumers have saved $2B in electric vehicle purchases since the beginning of the year as a result of credits offered by the U.S. government, the Treasury Department said on Tuesday.

As part of the Inflation Reduction Act, new electric vehicles were eligible for a credit of up to $7,500. The credit was available at the point of sale rather than when buyers file their taxes, a method preferred by consumers. The credit is only available to taxpayers will a joint income less than $300K and less than $150K for individuals filing separately.

According to data from Energy Innovation Policy & Technology, EV owners can save $18K to $24K over the lifetime of an EV in fuel costs over the purchase of a comparable ICE vehicle while the Department of Energy estimates that drivers can save $2,200 per year on a fully electric vehicle and $1,500 on a hybrid.

But even as the government offers enticements to encourage adoption of EVs over ICE vehicles, U.S. consumers have yet to fully embrace the electrification of the auto industry, preferring hybrids to EVs. This has prompted the major automakers to re-evaluate their manufacturing strategies.

And even while Tesla (NASDAQ:TSLA) has opened up its EV charging network to competitors, Detroit’s Big 3 are trimming their EV production targets to adjust to flattening consumer demand. General Motors (NYSE:GM) lowered its EV production targets by 50K for 2024, and Ford (NYSE:F) recently said its heightened focus on profitability and capital efficiency means more “electrification options” to include vehicles with lower prices and longer ranges, prioritizing the manufacture of hybrids.

Even Tesla (TSLA) the standard-bearer of the EV industry saw its Q1 sales decline for the first time in 2024, while Q2 sales were down 4.8% year-over-year.