The latest JD Power data indicates that tax credits are the most motivating for people to buy Volkswagen, Chevrolet, and Tesla EVs. Hyundai, Kia, and Toyota EV buyers were among the least motivated to use electric vehicles on tax credits alone. The loss of credits is widely expected to hurt U.S. electric vehicle sales at least somewhat.
President-elect Donald Trump has pledged to eliminate tax breaks on electric cars under the inflation-reducing law, but the move is getting surprising support from his new campaign financier Elon Musk. But a new study from J.D. Power suggests Tesla’s sales would actually take a hit if those credits disappeared.
The latest E-Vision Intelligence report from the auto industry marketing research firm has some great new data on which automakers have benefited the most from the tax credits, which cut up to $7,500 off the purchase or lease price of a new electric vehicle if certain conditions are met. . Biggest winners: Volkswagen, Chevrolet, and Tesla, in that order.
“Among all electric vehicle purchasers, tax credits and incentive programs are the most frequently chosen reason for purchase among Volkswagen (81%), Chevrolet (77%), and Tesla (72%) buyers,” the study said. The report was based on a survey of new car buyers but interestingly does not include Tesla Cybertruck, Polestar and Rivian owners.
To qualify for EV tax credits, generally, EVs and their batteries must be manufactured in North America, where the IRA aims to stimulate domestic production.
According to the survey, the “luxury segment” – which includes all Tesla models – benefited the most from tax breaks. While this plays into criticism that tax money helps wealthier people buy more expensive cars, it also makes sense; Electric cars are currently still more expensive than their gas-powered counterparts, and cheaper, more popular models are only just starting to make their debut after years of being limited to the higher end of things. In the “premium” segment, “64% of EV owners say that tax credits and other incentives influenced their purchase decision. In the mass market segment, 49% of EV owners were influenced by tax credits and incentives.” Tesla’s listing as a “premium” brand appears to have helped skew the data in that direction as well.
After all, the Volkswagen ID.4 can be had at fairly mainstream prices now, and Chevrolet’s all-electric vehicles represent great values that aren’t too far off from their gas-powered counterparts depending on equipment and trim levels. Therefore, it can be said that tax breaks succeed in moving the electric vehicle sector to more normal pricing levels; As electric vehicle sales increase and the battery supply chain grows, prices will continue to fall.
The numbers are staggering: “Among premium brand EV owners, 64% say that tax credits and other incentives were the main driver of their decision to buy or lease their electric vehicles,” the study said. “Among mass-market EV owners, 49% chose their vehicles based on tax credits and incentives. Industrywide, 87% of all EVs purchased or leased in 2024 received the federal EV tax credit.”
Moreover, tax breaks help people save money at a time when new car prices are at an all-time high and everyone is forced to squeeze grocery prices. “On average, consumers who buy or lease a new electric vehicle in 2024 saved $5,124 thanks to federal tax incentives for electric vehicles,” the study said. “This is up from $4,302 in 2023 and $1,629 in 2022. For EV leases in 2024, the average amount claimed in federal tax incentives was $6,696, and for sales, it was $4,257 “
So, which buyers were least motivated by EV tax credits? According to JD Power, these will be Toyota, Hyundai and Kia, which is a really interesting result. None of the Asian automakers build their electric vehicles in America (although that is now changing with the new Kia EV9, Hyundai Ioniq 5 and others) and so they are not eligible for tax credits unless they are leased. Between a fifth and a third of buyers of these brands said they were motivated by tax breaks. In the case of Hyundai and Kia, electric cars have also benefited from deep discounts offered by manufacturers and dealers. That all tracks with what we already know: Most Hyundai and Kia electric cars are leasedand may speak to the reason, say executives at Korean automakers They are not worried about declining sales If they lose the credits.
The study also confirms one thing we’ve been hearing over the past few years: that the EV tax credit system confuses many buyers and they probably don’t get much help navigating it from dealers. “All told, 43% of EV shoppers say they would describe their understanding of current EV incentives as ‘vague,’ ‘little,’ or ‘don’t know,’” the study said. “Only 17% say they have a strong understanding of EV incentives.”
There are a few things we can take away from all this data. First, it’s another data point that flies in the face of Musk’s claim that losing the tax credits “may actually help Tesla” in the long run, unless he’s counting on a complete collapse of the sector without an IRA. second, Losing the tax credits will likely reset the calculus that the entire auto industry has been working on over the past few years. Finally, It’s further proof that tax breaks help move minerals and save people money at the same time. “Having that extra incentive was enough to convince people to buy their electric vehicles,” Brent Gruber, executive director of JD Power’s electric vehicle practice, told Automotive News. “It wasn’t just the price alone.”
Contact the author: patrick.george@insideevs.com
