The end of EV subsidies could hand China the keys to the auto industry's future.
After narrowly passing in the House and Senate, President Trump signed his signature 'Big, Beautiful Bill' at a White House ceremony on July 4. While headlines have focused on its sweeping overhauls to tax policy, entitlement programs, and border security, a somewhat less-publicized but highly consequential provision—the elimination of the $7,500 federal tax credit for qualified EV purchases, effective September 30—has begun to reshape consumer behavior in the short term and will have long-term effects for the automotive industry.
In the short term, EV sales are surging as buyers rush to take advantage of the expiring subsidy. But beyond that deadline, the industry faces a far more uncertain landscape. Automakers that have spent heavily in electrification—battery plants, supply chains, and next-generation platforms—must now rethink their future investments to balance the opposing forces of a shifting domestic consumer value equation with global competitors that are continuing to forge ahead in this market sector.
Before we get into the potential longer-term consequences, let’s focus on the immediate effects of the bill. In the period between July 7-16, the number of (non-Tesla and Rivian) EVs that moved per day increased by 21% compared to results throughout June. This same metric, meanwhile, dropped by 3% and 1% for gas and hybrid vehicles, respectively. The movement share of these EVs increased by one full point, almost entirely at the expense of gas-powered offerings. It is expected that these metrics will move even more in the favor of EVs as the deadline nears.
While this short-term impact is entirely predictable, the longer-tailed echo effects are much less so. In response to the previous administration’s EPA-focused emissions policy, OEMs scrambled to introduce new models and produce EVs to gain footholds in this market segment. Various analyses had previously estimated that the worldwide investment in EVs and battery technology would total $1.2 trillion by 2030, with more than $300 billion expected to be spent in the U.S.
With the change in political leadership, however, many significant EV investments have been postponed or eliminated. General Motors reduced its battery plant plans from four to three, and Ford Motor Company put one of two intended plants on indefinite hold. Both of those manufacturers have redirected significant investments away from EV production and towards gas-powered choices. Toyota, Honda, and Nissan have all announced pullbacks on new EV introductions in the United States, and many other OEMs are currently rethinking their product mixes in the wake of the new legislation.
While understandable given the current political realities in front of them, OEMs are having to weigh the costs of yet another retooling of their production plants and the longer-term costs of abandoning the investments they had previously made. According to an expert cited in a recent New York Times article, “killing those programs would endanger more than $200 billion that auto companies, battery makers, mining companies and others have invested to create a U.S. electric vehicle supply chain.”
Perhaps the most significant and far-reaching prospect that domestic OEMs are weighing is ceding EV leadership to other geographies, particularly China. Ford CEO Jim Farley has been particularly vocal about the consequences of investment pullbacks, stating that “we are in a global competition with China, and it's not just EVs. And if we lose this, we do not have a future Ford.” The pullbacks in U.S. EV investments “could be the catalyst to complete Chinese domination in the global EV space [and] could cede the entire electric vehicle supply chain to China,” according to experts cited in a recent USA Today article.
The long-term effects on domestic manufacturers’ ability to compete cannot be understated. According to the aforementioned New York Times article, “One in five new cars sold worldwide is electric, and the percentage is increasing. That is one of the reasons that U.S. automakers have steadily lost ground in Asia, Europe and Latin America in recent years. Many consumers in those countries are instead buying cars from Chinese companies that offer a wide array of affordable electric and hybrid vehicles.”
The road ahead is not just about propulsion systems—it's about industrial survival. As EV incentives vanish and political tides shift, automakers must decide whether to chase short-term margins or stake their claim in a rapidly electrifying global market. Pulling back now may offer momentary relief and short-term profit, but it risks surrendering entire value chains, innovation pipelines, and consumer mindshare to international rivals—especially those in China. The question isn’t whether Americans will drive EVs; it’s whether they’ll be made in Detroit or imported from Shanghai or elsewhere. The next decade will determine which automakers lead—and which ones are left behind.
