[SMM Analysis] US IRS Adjusts EV Tax Credit Rules, Potentially Boosting US Q3 EV Production and Sales

From August 22 to 26, 2025, the US Internal Revenue Service (IRS) issued clarifications through platforms such as NPR and CNBC, announcing new adjustments to the expiring EV tax credit policy (up to $7,500):

As long as consumers sign a legally binding car purchase contract with a dealer by September 30, 2025 (inclusive), and make any form of down payment or trade-in, they can lock in the federal EV tax credit. The subsequent vehicle delivery date will no longer affect tax credit eligibility.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) (H.R.1) was passed, with Section 201 stipulating: "Sec. 30D credit shall not apply to any vehicle placed in service after September 30, 2025."

Since "placed in service" in this provision typically refers to vehicle delivery, registration, and readiness for personal use, the wording was widely interpreted by the media as requiring "vehicle delivery completion by September 30" to qualify for the tax credit. However, in late August 2025, the IRS issued supplementary guidance confirming that a "binding contract + down payment" could replace "vehicle delivery (placed in service)" as the eligibility lock-in point. The purchase contract must comply with legal requirements, and any form of down payment or trade-in suffices, while the subsequent delivery timeline may be extended without affecting tax credit eligibility.

As Q3 2025 marks the final applicable quarter for the $7,500 US EV tax credit policy, EV sales during this period are expected to exceed those of the same period in previous years and earlier quarters of the year. Analysts attribute this growth trend to the following factors:

1. Consumer urgency: Many consumers, upon learning of the impending expiration of the tax credit policy, began acting swiftly to secure purchases and lock in eligibility before the deadline. Particularly as the September 30 cutoff approaches, purchasing decisions are expected to intensify.

2. Policy incentive appeal: The $7,500 tax credit serves as a significant financial incentive for EV buyers, especially in higher-priced EV markets. With the policy nearing its end, consumers may accelerate purchasing decisions to reduce costs.

3. Automaker market response: To address potential demand surges, automakers and dealers are likely to respond proactively, driving stronger sales promotions and favorable terms to attract consumers to place orders before the policy expires. Therefore, it is expected that during the period at the end of Q3, the market supply of EVs will increase, and manufacturers will also collaborate to accelerate production and delivery.

4. Challenges of Logistics and Production Schedule Delays: The elimination of negative factors. Although most consumers hope to complete transactions as soon as possible, many EVs have long reservation cycles, especially for those car models whose orders have not yet been scheduled for production or are awaiting transportation, which may face delivery delays. The new IRS policy allows signing a car purchase contract and paying a down payment to lock in eligibility, mitigating the risk of missing incentives due to logistics and production schedule delays.

 The new IRS rules provide flexibility for car buyers, reducing the risk of missing tax credit eligibility due to logistics or production schedule delays. This is undoubtedly a benefit for consumers planning to purchase a car in September but unable to take delivery in time. Although there are no tax credit incentives in Q4 2025, the expected sales growth in Q3 is likely to boost the total annual EV market sales. However, for many consumers, missing the incentives after September 30 may delay their car purchase plans, leading to some demand disappearing in Q4.