The EV industry continues to face federal regulatory and political uncertainty and now, the clock is ticking on the Inflation Reduction Act’s electric vehicle (EV) tax credits and incentives. The recently proposed House and Senate versions of the “One Big Beautiful” reconciliation bill would rapidly phase out certain EV tax credits and eliminate others upon the bill becoming law. Proponents of the EV tax credits have warned that, aside from compounding EV affordability concerns, eliminating federal EV incentives could slow U.S. innovation, risk domestic jobs, and leave the U.S. behind global competitors in the transition to EVs. At the same time, the Trump Administration recently revoked the nation’s most stringent vehicle emission standards – though not without challenge from a coalition of states. In the face of a changing regulatory and tax landscape, states may need to rely more on voluntary incentives and rebates to promote EV adoption and advance their EV deployment policies.
This edition of EV Roundup highlights several recent updates and activities that are likely to have implications for state policymakers, the EV industry, and consumers.
Federal
- At the end of May 2025, Congress took unprecedented action employing the Congressional Review Act to overturn certain Clean Air Act waivers that allow California to set its own vehicle emissions standards. Between April 2023 and January 2025, the U.S. Environmental Protection Agency (EPA) granted California’s requests for three waivers to carry out the State’s regulatory program, including California’s Advanced Clean Trucks, Advanced Clean Cars II, and Omnibus Low Nox regulations. The Advanced Clean Cars II rule, or so-called “EV mandate”, requires that all new passenger vehicles sold in California be zero-emission by the 2035 model year. Since the adoption of the Advanced Clean Cars II rule in 2022, the auto and petroleum industries have fought to oppose implementation of the rule, which they assert is effectively a ban on gas-fueled vehicles. On June 12, 2025, President Trump signed three congressional resolutions purporting to disapprove California’s waivers and in so doing, effectively blocked California from implementing its zero-emission vehicle mandates and other stricter emissions standards for vehicles. Since Congress gave California the power to set its own, more stringent vehicle standards under the 1967 Clean Air Act, the U.S. EPA and Congress have not blocked California’s clean car and truck rules. This first of its kind rejection has sparked a lawsuit from California and other states that have adopted a version of California’s clean car and truck regulations in pursuit of their own state climate and EV policies (see more below).
- On Monday, June 16, 2025, the Senate Finance Committee released its highly anticipated proposal for the Republican budget reconciliation package. The bill text includes revisions and cuts to the clean energy tax credits authorized by the Inflation Reduction Act. In particular, the bill would eliminate the 30D (up to $7,500) tax credit for new electric vehicles that are purchased 180 or more days after enactment and end the 45W tax credit (up to $7,500) for leased EVs made outside of the U.S. EV lessors could still take advantage of the tax credit for 180 days from enactment, if the EV meets the same stringent domestic assembly, battery, and critical mineral content requirements as new, purchased EVs. Unlike the House version of the reconciliation bill, the Senate Finance version does not include the $250 annual road use fees on EVs and hybrids that have been a topic of debate for years.
State
- On June 12, 2025, California led a coalition of states in suing the Trump Administration and the U.S. EPA over the resolutions overturning California’s Clean Air Act waivers. Joining California in the suit are the states of Colorado, Delaware, New York, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and the Commonwealth of Massachusetts, all of which have adopted at least one of California’s regulations that were struck down by the resolutions. The complaint primarily takes aim at the federal government’s use of the Congressional Review Act—which was enacted to facilitate congressional review of certain federal agency regulations – to negate State regulations. The case is currently before the U.S. District Court of the Northern District of California and is likely to end up before the U.S. Supreme Court.
- On May 15, 2025, Vermont Governor Phil Scott signed an executive order pausing the States’ implementation of California’s clean car and truck rules until December 31, 2026. The order cites, among other things, insufficient charging infrastructure and insufficient technological advances to meet current goals, tariffs and other federal disruptions, and supply chain uncertainty as the need for the regulatory pause. The following week, Massachusetts followed suit announcing a 2-year pause on implementing its Advanced Clean Cars II program. Manufacturers that sell EVs in Massachusetts during this period of enforcement discretion can earn and carry forward credits for future compliance.
Industry
- In a 2025 U.S. Electric Vehicle Consideration Study released on May 15, 2025, J.D. Power reported that consumer demand for EVs has reminded stable over the last year, despite the uncertainty of federal tax credits and economic constraints on the auto industry. According to the study, 59% of vehicle shoppers said they were at least somewhat likely to consider an EV. Nevertheless, affordability remains a primary driver of EV adoption, and the cost of leasing or purchasing an EV will undoubtedly become less affordable with the elimination of federal tax credits for EVs.
- General Motors announced plans to invest $4 billion in three U.S. assembly plants to boost domestic production capacity of both gas and electric powered vehicles. The company plans to expand production capabilities at its Fairfax, Kansas facility where it will produce its next generation of more affordable EVs.
