Vulnerabilities in Biden's electric vehicle tax credits, particularly the leasing loophole, highlighted by experts as a potential issue

The ongoing debate surrounding electric vehicles (EVs) and their funding in the United States has been a topic of discussion for several years. In 2025, the incoming Trump administration had planned to redirect EV charger funding to national security priorities. However, the Biden administration, in a move to support the EV transition, announced on Jan 10 that it would provide $635 million in EV charger grants for 49 projects across 27 States, four federally recognized tribes, and Washington, D.C.

Despite this, just $700,000 of the $2.5 billion in funding from the bipartisan infrastructure law remains. This has led to criticism from some Republican lawmakers and experts who argue that these tax credits are economically inefficient, often providing subsidies to people who can afford to buy or lease an electric vehicle.

The Inflation Reduction Act (IRA), which came into effect, has seen significant investments in the EV supply chain. As of Jan 16, Republican-led congressional districts have received 84% of battery supply chain investments and 71% of EV supply chain investments. However, concerns have been raised about the cost-effectiveness of these incentives. For instance, it costs the federal government between $23,000 and $32,000 to encourage one additional electric vehicle purchase, even though the buyer receives only $7,500 in tax credits.

One of the challenges in the implementation of the IRA has been the leasing loophole. This allows people to lease electric vehicles that do not meet the domestic content restrictions that apply to purchases, seemingly undermining the IRA's policy goals. Ending the new clean vehicle tax credit won't significantly impact the EV market at this point, but the leasing loophole is most vulnerable to being cut.

The slowdown in EV sales began in 2023. A lack of reliable charging infrastructure has been identified as a more significant barrier to EV deployment than the cost differences between internal-combustion-engine vehicles and EVs. Improved charger uptime and driver confidence in the accuracy of real-time data could grow the EV share of new vehicle sales by 8.0 percentage points in 2030, expanding the EV fleet by 13.2% and reducing carbon emissions by 22.5 million metric tons carbon dioxide equivalent.

The benefits of the IRA's EV incentive program have been subject to debate. Research published last fall by the National Bureau of Economic Research found that the program produced a modest $1.02 in U.S. benefits per dollar spent. Despite this, the Biden Administration has made historic investments to support the EV transition and make sure it's made in America, according to U.S. Transportation Secretary Pete Buttigieg.

However, Congress is unlikely to fully repeal the IRA, even though some congressional Republicans would support it. The 48C investment tax credit and 45X production tax credit are likely to remain safe due to their benefits for Republican political constituents. The 30D clean vehicle credit and 45W commercial clean vehicle credit, also known as the leasing loophole, are most vulnerable to being cut.

In conclusion, the debate surrounding EV funding and incentives in the U.S. continues to evolve. While there are concerns about the cost-effectiveness of these incentives, the Biden Administration remains committed to supporting the EV transition and ensuring it's made in America. The future of the IRA and its various tax credits remains uncertain, with the leasing loophole being the most vulnerable to being cut.

Vulnerabilities in Biden's electric vehicle tax credits, particularly the leasing loophole, highlighted by experts as a potential issue