The recently enacted “One Big Beautiful Bill” (OBBB), signed into law last weekend, is poised to fundamentally reshape the landscape of the U.S. electric vehicle (EV) market by eliminating key federal incentives. This legislative action, effective September 30, 2025, terminates the $7,500 federal tax credit for new electric vehicles, a program initially slated to run until 2032, and also impacts a $4,000 credit for used EVs. The move introduces significant uncertainty for an American automotive industry already grappling with a transformative shift towards electrification amidst tepid domestic demand and escalating price competition.

Consumers looking to purchase an EV now face a rapidly closing window to benefit from existing incentives. Joseph Yoon, a consumer insights analyst at Edmunds, advises prospective buyers to act swiftly, stating, “If you’re in a market for an EV now, you should go buy it.” Eligible vehicles, including models like the $43,000 Tesla Model 3, the $37,000 Chevy Equinox EV, and the $61,000 Hyundai Ioniq 9, become significantly more accessible with the credit. However, eligibility is contingent on factors such as vehicle assembly location, battery component sourcing, and buyer income thresholds. Post-September, some analysts, including Nick Nigro, founder of Atlas Public Policy, anticipate automakers may resort to “more aggressive pricing” to stimulate demand in the absence of federal support, potentially leading to showroom deals.

Beyond direct consumer incentives, the OBBB also impacts the broader EV ecosystem. While it did not eliminate manufacturing tax credits entirely, it introduces stricter domestic component requirements, which Kathy Harris, who directs the clean vehicles program at the Natural Resources Defense Council, notes will likely make it harder for some supply chain participants to qualify. Furthermore, the bill removes penalties for automakers failing to meet Corporate Average Fuel Economy (CAFE) standards. These standards have historically driven manufacturers towards more fuel-efficient and electrified powertrains, and their removal diminishes a key regulatory incentive for cleaner vehicle development.

In response to the federal policy shift, state-level initiatives are gaining prominence. Eleven states, including California, Colorado, and New York, are actively pursuing policies to promote cleaner vehicles. California Governor Gavin Newsom has specifically directed state agencies to develop new strategies to support zero-emission vehicles, maintaining the state’s ambitious goal of phasing out new gasoline car sales by 2035. This regional leadership may partially offset the federal withdrawal, creating a more fragmented incentive landscape across the U.S.

Globally, the EV transition continues its momentum, contrasting with the U.S. policy changes. Volkswagen Group, for instance, reported a 47% surge in global EV sales in the first half of 2025, with a remarkable 90% increase in Europe, where its EV sales are now outstripping Tesla’s. This global competitive pressure, particularly from markets like China, suggests that U.S. automakers will need to continue their EV development to remain competitive internationally, irrespective of domestic policy headwinds. While the immediate impact of the OBBB may cause short-term pain and market adjustments, industry observers like Yoon view it as a “speed bump rather than a true obstacle” to the long-term global shift towards electric mobility.