Winners and losers as the EV tax credit rules change for 2025
The list of electric vehicles that qualify for the IRS clean vehicle tax credit has changed with the arrival of the new year. No longer linked to battery capacity, the credit of up to $7,500 is now tied to the sourcing of battery components—each year, an increasing amount must be extracted or refined in the US (or a free trade partner) to be eligible. The total number of eligible EVs has actually increased in 2025, from 24 last year to 27 this year, but a number of automakers' products have also dropped off the list in the process.
The $7,500 tax credit is split into two components. $3,750 is available if the battery components are made or assembled in the US. The other half now requires that 60 percent of the critical minerals in the battery—things like lithium, nickel, and so on—be extracted or refined in the US (or by a free trade partner). Last year, this threshold was 50 percent; next year, it will increase to 70 percent.
Additionally, national security concerns mean that no EV is eligible if any of its battery components are manufactured by a "foreign entity of concern," which means any company with direct links to the governments of China, Iran, North Korea, or Russia. While the latter three have no domestic EV production they're trying to sell in the US, that obviously does not apply to China, which heavily subsidizes its domestic car makers to allow them to export their vehicles at rock bottom prices to undermine local industry in other regions.