Economists: The cancellation of tax exemptions in the United States will lead to a sharp decline of 27% in future demand for electric cars.

Economists estimate that canceling tax breaks for electric vehicles in the United States will weaken future demand for electric cars - perhaps by more than a quarter - while having a negligible impact on gasoline consumption. US automaker stocks fell last week after reports suggested that President-elect Trump may try to eliminate the $7,500 tax break, which is part of the 2022 Inflation Reduction Act. Joseph Shapiro from the University of California, Berkeley, said that eliminating this incentive could reduce future demand for electric cars by 27%. Shapiro and Felix Tintelnot from Duke University stated that compared to maintaining the tax break, the annual number of electric vehicles registered in the US could decrease by 317,000. However, because electric vehicles still represent only a small portion of new car sales, the impact on gasoline demand from subsidies being canceled is not significant. Shapiro and Tintelnot stated that in the first year, gasoline consumption would increase by 155 million gallons. Over ten years, if the tax break remains unchanged, the US would use approximately 7 billion gallons more than it does now. Shapiro explained in an email that while this number may sound large, it only represents 5% of the typical annual consumption of 136 billion gallons in the US. Morgan Stanley analyst Adam Jonas stated in a research report this week that even if Trump cancels the tax break, the adoption of electric vehicles in the US will not come to a halt. He wrote, "While a slowdown in the rate of electric vehicle adoption may give some legacy companies valuable time to catch up, we still expect that as innovation and scale bring lower costs and higher performance, the penetration rate of electric vehicles will continue to rise in the long run."