A two-year assessment of the IRA's subsidies to the electric vehicles in the US: Uptake and assembly plants for batteries and EVs

Sandrine Levasseur ()
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Sandrine Levasseur: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: In this paper, we assess electric vehicle (EV) tax credits in the US Inflation Reduction Act (IRA), the largest significant action in favour of climate change in US history. We find that the provisions of the IRA have so far done little to increase the uptake of EVs by US households, accounting at best for 10 % of monthly new light vehicle sales since the IRA was passed. This is well below most ex-ante estimates of EV uptake under the legislation. In contrast, the IRA has triggered EV battery plant projects in the United States, reinforcing the move by automakers to secure their supply chain since the Covid crisis. In total, current and projected GWh capacity would allow 17.0 million EVs to be powered annually by 2030, compared to the 1.2 million EVs sold in 2023. Thus, to date, the IRA has created a potentially huge imbalance between supply and demand in the US EV market. We also document the strategies followed by automakers to capture EV market share in the United States, with a focus on whether they are incumbents or startups, and whether they are based in allied countries.

Keywords: Inflation reduction act; Electrical vehicles; Tax credit; Automotive industry; Foreign entity of concern (search for similar items in EconPapers)
Date: 2025-06
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Published in Asia and the Global Economy, 2025, 5 (1), pp.100102. ⟨10.1016/j.aglobe.2024.100102⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04871392

DOI: 10.1016/j.aglobe.2024.100102

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