A sweeping Republican-sponsored bill informally dubbed the "One Big Beautiful Bill Act" has cleared both chambers of Congress and now awaits President Donald Trump's signature. Once signed into law, it will repeal the Inflation Reduction Act (IRA), a cornerstone of former President Biden's climate and clean energy agenda, effectively marking the end of a short-lived era of generous federal subsidies for electric vehicles and renewable energy.
EV subsidies set to expire by September
The most immediate impact will be felt in the EV market. Beginning September 30, federal tax credits of US$7,500 for new EVs and US$4,000 for used ones will be eliminated. These incentives were instrumental in driving EV adoption, with consumer research showing that subsidies were a decisive factor for most buyers in 2024 and 2025.
Although the IRA originally envisioned phasing out the EV tax credits no earlier than 2023, efforts to introduce a longer transition period failed in the House. Automakers and dealers had publicly urged Congress to maintain the incentives, but their appeals were ultimately ignored.
Rush to buy before deadline
With the subsidy cutoff approaching, supply chain insiders anticipate a last-minute buying frenzy. Popular EV brands from the US, Europe, Japan, and South Korea may see a short-term sales bump, although the extent of the demand surge remains uncertain. Industry observers point to newly imposed US tariffs on foreign vehicles and parts, which have raised prices and strained availability, limiting how much demand can realistically be met.
According to foreign media reports, US dealerships currently hold approximately 140,000 EVs in stock, poised for potential pre-deadline sales.
An 'Ice Age' for the US EV market?
The repeal of EV tax incentives is just one part of a broader rollback. Funding for EV charging infrastructure — already frozen — will be formally terminated, worsening range anxiety for potential buyers. Without subsidies or a reliable charging network, consumer hesitation is likely to deepen.
Meanwhile, the new legislation removes penalties on gasoline-powered vehicles that exceed emissions limits, effectively creating a more favorable regulatory environment for traditional internal combustion engines.
New incentives for American-made cars
To support US-based automakers, the bill introduces a new personal income tax deduction of up to US$10,000 per year for interest paid on car loans between 2025 and 2028. However, to qualify, the vehicle must be assembled in the United States, and the deduction is capped by income level and excludes commercial vehicles.
Tighter scrutiny of 'Foreign Entities'
Even before the legislation passed, concerns were rising over stricter regulations targeting "foreign entities of concern" — particularly Chinese-affiliated firms operating in the solar and battery storage sectors. The new bill formalizes those fears, setting new eligibility requirements for battery and component tax credits: both the taxpayer and the suppliers must not be affiliated with any restricted foreign entity.
While Washington has yet to release a full list of restricted companies, it has pledged to provide additional guidance during the first tax year of implementation.
The legislation also adds domestic sourcing rules for secondary components. To qualify for tax relief, at least 65% of a product's material costs must originate from U.S.-extracted, produced, or manufactured components. In contrast to the IRA's open-ended approach, critical mineral sourcing now faces a hard deadline of December 31, 2033.
The IRA's repeal deals a severe blow to the solar and wind industries. While a transition period will allow projects that reach grid connection by the end of 2027 to still qualify for credits, developers now face a compressed construction timeline of just 12 months after the law takes effect.
The new constraints will be especially painful for projects dependent on Chinese-made components or Chinese-owned US manufacturing facilities, which are likely to fall under new scrutiny or be disqualified outright.
Ripple effects for AI and big tech
The legislation may also complicate the energy strategies of major cloud service providers like Amazon AWS, Microsoft, Google, and Meta, all of which are building power-hungry AI data centers. These firms — many of which are members of the RE100 initiative, committing to 100% renewable energy — have relied heavily on solar, wind, and battery storage to meet sustainability goals. With clean energy incentives stripped and import rules tightened, their road to green power just got steeper.
Not all alternative energy sources will be affected equally. The bill preserves tax benefits for geothermal, nuclear power, and chemical battery storage through the end of 2033. While nuclear energy is excluded from RE100's definition of "renewable," its protected status under the new law signals continued federal support for non-carbon energy alternatives outside the solar and wind sectors.
Article edited by Jack Wu
