Al Root

Some details of President Donald Trump's so-called big, beautiful tax bill are out. Now, automotive investors have two matters to consider: the possibility that electric-vehicle tax credits could vanish, and the potential for new tax breaks on cars assembled in the U.S.

On Tuesday, the House Ways and Means Committee, which drafts tax legislation, is set to release so-called markup details of a budget reconciliation bill that the president calls his "Big Beautiful Bill." It's an early look into the battle to pass legislation that could extend the president's 2017 tax cuts, and even add to them.

A lot is expected to change, but some details have emerged.

Investors should brace for the repeal of the EV purchase tax credits passed as part of former President Joe Biden's Inflation Reduction Act. "Consumer credits will be repealed almost immediately, while business tax credits will be phased out," wrote Capital Alpha Partners analyst James Lucier in a Monday report, citing the Congressional Quarterly.

Right now, consumers can claim a deduction worth up to $7,500 for qualifying EV purchases. Businesses can claim the deduction, too, which has created a leasing loophole for EV purchases. Any EV, regardless of make, country of origin, cost, or buyers' income, can get the $7,500 credit if leased.

It looks like a commercial phaseout, rather than a quicker end to the credit, might be too much to hope for. The early markup from the committee kills the commercial vehicle credit at the end of 2025, while contracts for vehicle purchases that were signed before Monday can still claim the credit even if the vehicles are delivered in subsequent years.

A gradual phaseout for the commercial credit would be a relative positive for the EV industry, including Tesla.

A new tax break for American-assembled cars is also part of the initial markup. Essentially, car buyers could deduct interest on auto loans from their taxable income, if the car was made in America.

What that is worth to consumers is difficult to say. Most tax filers use the standard deduction; interest deductions only matter for people who itemize.

In theory, deducting auto loan interest could save a borrower a few hundred dollars a year, essentially offsetting the monthly impact from any tariff-induced car-price increases. Trump tariffs have the potential to increase new car prices by $2,000 to $5,000, according to Wall Street estimates.

That is only very rough math. It depends on any number of factors, including the car purchased, interest rates, and auto makers' pricing strategies.

Still, the deductibility of interest for domestically made cars benefits those who make the most vehicles in the U.S. That includes Tesla, Rivian, and Ford Motor.

Tesla and Rivian make all the cars they assemble domestically in the U.S., while Ford makes about 80%. General Motors makes about 60%, with imports coming mainly from Mexico. Overall, about half of the new cars sold in the U.S. annually are imported.

The markup is one step in getting President Trump's legislative agenda passed. "Seven years ago, the Trump tax cuts sparked an economic boom and provided needed relief to working families," said Missouri Representative and House Ways and Means Committee Chairman Jason Smith in a news release. "Pro-family, pro-worker tax provisions are the heart of President Trump's economic agenda."

Investors will be waiting to see details of the bill.

Ford, Rivian, GM, and Tesla stock rose an average of about 4% on Monday, while the S&P 500 and Dow Jones Industrial Average added 3.3% and 2.8%, respectively. A 90-day pause on some tariffs China and the U.S. had imposed on each other sent most shares higher to start the week.

Write to Al Root at allen.root@dowjones.com

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May 12, 2025 17:39 ET (21:39 GMT)

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