WASHINGTON — The pullback on Biden-era tax credits in the budget passed by the Republican-controlled U.S. House could stunt the growth of the nation's still-fledgling electric vehicle industry and create ripple effects throughout the global autos market, clean energy advocates warn.

"Anybody who claims to be concerned about Chinese dominance in battery minerals and supportive of U.S. competitiveness in that sector needs to know: This bill is absolutely devastating to that goal," said Albert Gore, executive director of the Zero Emission Transportation Association.

The credits are meant to stoke both the domestic supply of critical minerals and advanced battery technologies and the demand for consumer products that use those materials, namely next-generation, zero-emission vehicles.

Environment-minded conservatives argue that broader tax breaks — which would be less targeted toward EVs and critical minerals — and regulatory rollbacks are instead best for growing those industries, and that Democrats are wrong to catastrophize over the changes. But with significant policy whiplash looming, advocates said multibillion-dollar investments in key sectors could shrivel thanks to the harsh realities of competing with the United States' chief economic rival.

They also predicted political consequences for Republicans if the Senate follows suit and President Donald Trump, who has been critical of non-Tesla electric vehicles, signs a rollback into law.

"The plan passed by House leadership will make it harder to produce the energy America needs, while simultaneously putting hundreds of projects, thousands of jobs and billions in investments at risk — mostly in Republican states that elected them," said Bob Keefe, executive director of E2, a nonpartisan business group focused on energy and the environment, in a statement.

Investments don't sway GOP

Even with those risks, House Republicans voted to pull back on EV-related credits in their tax and spending mega bill that passed along party lines on May 22 after all-night negotiations and a week of marathon markup sessions in budget committees.

The final version of the package seeks to eliminate four tax credits for EVs by the end of 2025 and modify another on manufacturing that auto industry leaders have said is crucial to building domestic battery prowess.

The EV credits include the so-called 30D program offering $7,500 on the purchase of qualifying new light-duty models, 25E offering $4,000 for used models, 45W providing up to $40,000 for commercial vehicles and 30C giving $1,000 for individuals to install EV chargers.

The 45X manufacturing credit targets battery producers and upstream industries. Battery cells, which store and release energy needed to power EVs, are each eligible for a credit of $35 per kilowatt-hour of energy they can store. Critical mineral miners, processors, purifiers and recyclers can claim a credit equal to 10% of their production costs.

The bill proposes phasing out that credit a year earlier than initially planned and adding new requirements against the use of materials from certain foreign nations.

"The production credit is critical for our industry, and it will be a significant impact for our industry if it goes away," Ford Motor Co. CEO Jim Farley said in January at the Detroit Auto Show. "Many of our plants in the Midwest that have converted to EVs depend on the production credit. We would have built those factories in other places, but we didn't."

In Michigan, according to E2 data, Republican-led congressional districts have attracted an overwhelming majority of the state's investment into clean vehicles since the August 2022 passage of the Inflation Reduction Act, former Democratic President Joe Biden's signature climate investment law. The data only includes projects that had no public proposals or plans before the IRA passed.

There have been 28 clean vehicle projects announced in Michigan since then, per E2. Investments associated with those projects total about $10.5 billion. Among projects with set locations, 16 are in U.S. House districts represented by Republicans and 11 in Democratic districts. More than $8.5 billion and 6,058 jobs will flow to GOP areas, whereas $1.9 billion and 3,714 are slated for Democratic areas.

Some of the Republican-district projects, however, have drawn ire from their representatives over ties to China.

Nationally, Republicans' advantage on clean vehicle projects is even larger. Their districts attracted 10 times as much investment, with $70.7 billion and 49,418 projected jobs in GOP areas vs. $7.2 billion and 11,670 jobs in Democratic areas.

The conservative take

Conservative energy policy advocates, meanwhile, have downplayed the negative impacts of IRA rollbacks. Nick Loris, the executive vice president of the Conservative Coalition for Climate Solutions, said the elimination of credits will help "rationalize" industries and motivate them to break long-term reliance on government support.

That is especially important, Loris said in a phone interview, given the "kind of dire fiscal condition the country is in." The GOP proposal to end and scale back IRA credits will directly save the federal government about $559 billion, according to a nonpartisan Congressional Budget Office projection, which also estimates the budget bill overall will add $2.3 trillion to the deficit over 10 years.

"If you subsidize something, you're going to get more of it. If you take away those subsidies, it stands to reason that you'll get less of it," he said. "But I think it's important to recognize a few things."

Loris continued: "If these tax credits go away, both on the manufacturing side and on the consumption side for the EV tax credit, that doesn't necessarily mean the industry is going to wither away. If you look at some of the investments that have been made on EVs and battery manufacturing, there have been a number of plants that were built or committed to before the CHIPs Act and before the Inflation Act even got off the ground."

He praised the House GOP proposal for potentially boosting the automotive, clean energy and manufacturing sectors through another mechanism: expensing. The bill, according to the nonpartisan Tax Foundation, will restore — and in some cases expand — businesses' ability to offset expenses against taxable income.

The package would restore expensing for domestic research and development expenses through 2029. It would also provide 100% expensing of certain manufacturing, extraction, and agriculture projects that break ground by the end of 2028 and go into service by the end of 2032.

Those provisions, according to the CBO, will cost the federal government about $171 billion.

"There's an opportunity that if America continues to have a lower tax rate overall and continues to have these provisions that are technology and energy agnostic," Loris said. "I think those provisions will provide the necessary certainty for American companies to make investments in the long run."

'Knocked both legs out'

That is little consolation to supporters of the Biden-era credits who say the supports are essential to helping the United States catch up with China as the global leader in critical minerals extraction and refining, battery production and electric vehicle sales.

"The problem of Chinese dominance, particularly the processing of battery minerals, is incredibly difficult to deal with," ZETA's Gore said in an interview. "But the combination of the 30D and 45X credits was incredibly effective at bringing that investment in that sector here."

"We had a very serious way of solving it, and we've now knocked both legs out from that strategy," he added.

His association represents a wide range of EV players, such as automaker Tesla Inc., battery-maker Samsung SDI, regional power utility Duke Energy, mining company Lithium Americas Corp. and others.

"No member of Congress should be surprised if, in voting for this bill, six months or a year from now, the momentum in that sector stalls out," the son of former Vice President Al Gore said.

Abigail Hunter, the executive director of SAFE’s Center for Critical Minerals Strategy, expressed similar concerns last week during testimony in front of the House Energy and Commerce Committee. Hunter's organization engages in nonpartisan advocacy on domestic energy issues.

"The 45X tax credit does help attract investment here consistently over a long period of time. And without that, we risk the continued disinterest of investors and producers looking at the United States as an opportunity to process," she said.

Hunter continued: "We risk undermining (Trump's) very clear agenda for unleashing American minerals and making sure we leverage domestic processing."

Alex Jacquez, a Biden administration adviser on economic development and industrial strategy, said that looming policy changes from Trump and Republican majorities in Congress have already had a real "market-chilling impact."

"There are going to be project cancellations. There are going to be projects that are no longer viable. They're going to be projects that are scaled down. And you've already started to see this in the first quarter of 2025," he said in a phone interview, citing a report from the Clean Investment Monitor, a joint effort of Rhodium Group and the Massachusetts Institute of Technology.

The report noted the cancellation of six manufacturing projects tied to $6.9 billion of investment in the first three months of 2025, "the highest value of quarterly cancellations on record."

Keefe, the head of E2, said it is "up to the Senate to fix this big, ugly mess of a bill."

He added: "With more than 400 major clean energy projects and our energy future hanging in the balance, we hope they’ll put their constituents ahead of politics and make America great through action, not words.”

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