[SMM Analysis] Trump's "Big and Beautiful" Bill Terminates EV Tax Credits: Policy Rollback and Industrial Game in the US New Energy Vehicle Market

On July 3, 2025, the US House of Representatives passed a comprehensive tax and spending reform bill (The One, Big, Beautiful Bill) led by President Trump. The bill's content is extensive, with significant adjustments to the EV subsidy mechanism drawing widespread market attention.The $7,500 federal tax credit for new cars and the $4,000 credit for used cars will officially terminate on September 30, which is expected to have a profound impact on the US NEV market. This article attempts to explore the impact of this policy shift on the US NEV industry from the perspective of policy changes, combined with market structure and corporate strategies, and to sort out the deeper game relationship between the Trump administration and Musk.

I. Policy Changes: Subsidy Withdrawal and Cost Increase

The EV-related provisions of this bill mainly include three aspects:

1. Termination of Federal Tax Credits:

The original $7,500 subsidy for new cars and $4,000 subsidy for used cars will expire on September 30, 2025. These two subsidies, implemented since 2008 and optimized by the Inflation Reduction Act (IRA) in 2023, have played a crucial role in boosting EV sales, especially accounting for a high proportion in the price range of $30,000–$60,000. The original Inflation Reduction Act planned to cancel the tax credit policy for EVs only by the end of 2032.

2. New Registration Fees:

The bill stipulates that EVs will be subject to a $250 registration fee, while hybrid vehicles will be subject to a $100 fee. The rationale for this fee is to make up for the shortfall in the Highway Trust Fund caused by EVs not paying gasoline taxes.

3. Other Unconfirmed Provisions:

Early versions of the bill proposed restricting the eligibility of products using batteries made in China and allowing companies with sales below 200,000 units to continue enjoying subsidies during the transition period. However, whether these provisions will be included in the final version remains to be announced.

Overall, this round of policy adjustments aims to weaken the fiscal incentive foundation for EVs while restoring "parity" in road usage costs between internal combustion engine vehicles and EVs through a fee mechanism.

II. Market Impact: Short-Term Overdraft and Long-Term Downward Pressure Increase

1. Consumer Side: Subsidy Window Drives Short-Term Buying Frenzy

Before the subsidy expiration date is confirmed, some consumers will choose to purchase cars ahead of time to lock in the existing policy benefits. Organizations like Plug In America predict that there may be a wave of panic buying this summer, particularly concentrated within the mainstream EV price range (approximately $40,000–$60,000). However, it is worth noting that this concentrated consumption will deplete subsequent demand in the short term, and it is highly probable that NEV sales in the US will experience a significant decline starting from October. For middle- and low-income groups, the impact of rising car purchase costs is particularly pronounced.

2. Supply side: Tesla still has buffering capacity, while risks for startups rise

Tesla's brand recognition, capacity efficiency, and global layout help partially offset the impact of the withdrawal of local subsidies, and it may adjust through measures such as price reductions and financing lease plans. For emerging companies (such as Rivian, Lucid, etc.) that rely on subsidies to boost sales, the loss of subsidies may directly affect their profitability expectations and financing capabilities.Regarding traditional automakers , some brands may take this opportunity to adjust the pace of electrification and return to a product mix of internal combustion engine vehicles and hybrid vehicles to adapt to changes in the policy environment.

III. Political Motivations and Gameplay: Differences between the Trump Administration and Musk

Despite Musk's support for the Republican Party on some issues in recent years, he has substantial differences with the Trump Administration on issues such as the development path of EVs, energy policy, and the relationship between federal and local powers.

1. Differences in policy concepts

The Trump Administration has consistently opposed "favoring" EVs in policies, advocating for returning market choice to consumers and eliminating the tendency towards forced transformation. Legislative attempts by California to set a proportion for pure EV sales may also face federal-level restrictions under the new bill.

2. Redistribution of policy tools

The cancellation of federal-level EV incentives does not prevent some state governments from continuing to promote the transition through local tax incentives, charging subsidies, etc., but the space for policy benefits has been significantly compressed. For automakers relying on a nationwide incentive system, relying solely on local support is difficult to maintain the existing pace of capacity expansion.

IV. Market Adjustment and Structural Reconfiguration Under the US Policy Cycle

The implementation of the "Big and Beautiful Act" led by Trump represents a sharp turn in the policy logic of the US new energy vehicle (NEV) market. From the initiation of subsidies in 2008 to the escalation of the Inflation Reduction Act (IRA) in 2023, and now to an abrupt halt, this dramatic swing not only reflects the divergence between the two US political parties on the industrial path but also exposes the risks of "policy dependency" in the new energy transition.

For the market, the most direct impact will be the pain following short-term supply-demand imbalance. After the "Electric Summer" buying frenzy subsides, a decline in sales from October onwards is almost inevitable—especially for car models priced between $30,000 and $50,000, which heavily rely on subsidies to drive consumption, with sales potentially dropping by over 20%. Middle- and low-income families will be forced out of the new energy market, reverting EVs to being "exclusive to the middle class," which contradicts the US's long-term goal of promoting transportation emissions reduction.

Differentiation at the enterprise level will accelerate. Tesla, leveraging its large-scale production and brand premium, can absorb subsidy losses through price cuts of 5%-8%, but its profit margins may shrink to below 15%. Money-burning enterprises like Rivian and Lucid face a heightened risk of cash flow disruption if they cannot secure financing by the end of September, potentially leading to an industry reshuffle earlier than expected. Traditional automakers will adopt a more pragmatic strategy: Ford and General Motors may scale back production capacity for electric pickup trucks and instead increase investment in hybrid vehicles; European brands like Stellantis may redirect resources from the US market to regions with more lenient policies, such as Latin America.

The deeper impact of this policy withdrawal lies in reshaping the cost logic of the global new energy industry chain. The US attempts to force enterprises to "de-policyize" their survival by canceling subsidies, but this requires cost control capabilities across the entire industry chain—currently, the US still relies on imports in areas such as battery raw material processing and core components for motor and electronic control, making it difficult to achieve complete self-sufficiency in the short term. If the provisions in the bill restricting Chinese batteries are retained, local automakers' battery procurement costs may rise by 10%-15%, weakening their competitiveness instead.

In the long run, the US NEV market will enter a phase of overlapping "policy vacuum" and "technological ramp-up." The withdrawal of subsidies forces enterprises to focus on improving battery energy density, optimizing charging networks, and other hard capabilities, but policy uncertainty may slow down the pace of capital investment. In contrast, China maintains policy continuity through stepped subsidy withdrawals, while Europe constructs long-term mechanisms relying on carbon tariffs. The authority to set rules in the global new energy competition is undergoing a subtle shift.

Ultimately, Trump's bill may bring short-term revenue to the Highway Trust Fund, but at the cost of sacrificing the growth momentum of the new energy vehicle market. Industrial transformation has never been a simple matter of adding or subtracting policies. When the US cuts off subsidy dependence with a "shock therapy" approach, whether it can complete the transformation driven by the spontaneous forces of the market will become an important case to test the resilience of the global new energy industry—and the answer may not be revealed until automakers' financial reports in 2026.