Washington: Eliminating the US electric vehicle (EV) tax credit would dent future EV demand – perhaps by more than a fourth – while providing a trivial boost to petrol consumption, economists estimate.

US auto stocks fell last week on reports that President-elect Donald Trump may try to kill the US$7,500 credit, which was part of the 2022 Inflation Reduction Act.

Removing it could cut future EV demand by 27%, said Joseph Shapiro at the University of California, Berkeley.

Annual EV registrations in the US could fall by 317,000 cars compared with what they would have been if the credit remained intact, according to Shapiro and Felix Tintelnot at North Carolina’s Duke University.

And yet, because EVs still account for a small percentage of new car sales, removing the credit would have little impact on petrol demand.

Fuel consumption would increase 586.7 million litres in the first year, Shapiro and Tintelnot said.

Over the course of a decade, the United States would use about 26.5 billion more litres than it would have if the credit stayed in place.

While that may sound substantial, it represents just 5% of the 515 billion litres the United States uses in a typical year, Shapiro said in an email.

Even if Trump eliminates the tax credit, EV adoption in the United States will not stop, Morgan Stanley analyst Adam Jonas said in a research note this week.

“While a slowing of EV adoption can provide valuable time for some legacy players to catch-up, we still expect EV penetration to keep rising long term as innovation and scale will bring lower cost and higher performance products,” he wrote. 

- Bloomberg