A Driving Shift: How the One Big Beautiful Bill Ends EV Tax Credits and Drives Change in the Car Market

The Fourth of July brought more than fireworks this year. It delivered a legislative shakeup that’s sending shockwaves through the automotive world—and your future car purchase might feel the heat. Signed into law on July 4, 2025, the One Big Beautiful Bill (OBBB) isn’t just a flashy name. It’s a seismic shift in how the U.S. government approaches electric vehicle incentives, car financing, and trade relationships.

And if that wasn’t enough, the week wrapped up with a surprise: steep new tariffs on Japanese and Korean vehicle parts and components, adding fuel to an already volatile market.

Here’s what it all means for car buyers, automakers, and the dealerships caught in the middle.

One Big Beautiful Bill ends EV tax credits and creates a seismic shift in the automotive industry.

⚡ EV Tax Credits Are Ending—Fast

If you’ve been on the fence about buying an electric vehicle (EV), it’s time to get off. The OBBB officially ends the federal $7,500 tax credit for new EVs and the $4,000 credit for used EVs, effective September 30, 2025.

That gives consumers just a few months to take advantage of these incentives before they vanish.

What to expect:

• A rush of EV purchases between now and September.

• Potential dealer markups as demand spikes temporarily.

• A significant drop in EV affordability starting this fall, particularly for middle-class buyers.

Electric vehicles aren’t getting cheaper to produce, and without these credits, price-sensitive shoppers may return to gas or hybrid models—especially if gas prices remain stable.

💰 New Auto Loan Tax Deduction—But With Strings Attached

To soften the blow of losing EV credits, the OBBB introduces a new tax perk: consumers can deduct up to $10,000 per year in interest on car loans, starting in 2025 and running through 2028.

But there’s a catch—several, actually:

• The deduction only applies to new vehicles assembled in the United States.

• It phases out for individuals earning over $150,000 or households earning over $300,000.

• The savings could amount to $300–$500 per year for the average buyer, depending on loan size and interest rate.

This is a clear move to encourage buyers to shop domestic. But not every “American” brand qualifies—only vehicles physically built in U.S. factories make the cut. So before you celebrate, check your car’s VIN and build sheet.

🛠️ (Not So) Surprise Tariffs on Japanese & Korean Cars and Parts

As if the OBBB weren’t enough to digest, President Trump announced new 25% tariffs on vehicles and parts imported from Japan, effective August 1. This is aimed at leveling the trade playing field, but it could backfire for both automakers and consumers.

What’s affected:

• Imported Japanese vehicles not already subject to tariffs (mainly hybrids and niche models).

• Critical parts like sensors, brake assemblies, transmissions, and ADAS components—even for cars built in the U.S.

• Service and repair costs on popular brands like Toyota, Honda, Subaru, and Nissan.

Dealers are bracing for price increases not just on new inventory but also on replacement parts, which could affect everything from routine maintenance to insurance claims.

One insider warning: If your local service center relies heavily on Japanese parts, don’t be surprised if wait times increase and repair bills go up this fall.

📉 What This Means for Automakers

This policy one-two punch has automakers scrambling - again.

Winners:

• U.S. manufacturers like Ford, GM, and Tesla, who assemble most of their models domestically and can now offer the new loan deduction benefit.

• EV makers that can quickly pivot production and pricing before the credit cutoff.

Losers:

• Japanese and Korean brands, especially those without extensive U.S. manufacturing operations.

• EV startups that depended heavily on the federal tax credit to stay competitive and recoup R&D costs.

Expect more automakers to announce shifts in production, new U.S. factories, or pricing changes in the coming months. Some may also push hybrid models as a more affordable, incentive-free alternative to EVs.

🧾 Consumer Advice: What You Should Do Now

Here’s how to make smart decisions as this policy wave rolls through:

1. Thinking about an EV? Buy before September 30 to lock in the $7,500 credit. Don’t wait—inventory could shrink quickly.

2. Financing a new car? Ask your dealer if the vehicle qualifies for the new loan interest deduction. It must be assembled in the U.S., not just from a U.S.-based brand.

3. Driving a Japanese car? Consider getting major service or repairs done before August 1, when tariffs may make parts more expensive and harder to find.

4. Don’t panic shop. Yes, there’s a lot of change—but not every vehicle is affected equally. Stay informed and shop with a plan.

🔧 A Shift in Auto Buying Strategy

The combination of expiring EV incentives, new financing perks, and aggressive trade tariffs creates a complicated landscape for car buyers. This isn’t just policy—it’s economics, politics, and personal finance all rolled into one.

Some buyers may find better deals now than they’ll see again for years. Others may find that holding off a few months—until the dust settles—makes more sense. Either way, how and what you buy is about to matter a lot more than it did last year.

👉 Final Gear Shift

The car market has always had its ups and downs, but we’re now entering a high-stakes curve in the road. Whether you’re buying new, fixing old, or just trying to avoid getting burned at the dealership, this is a moment to pay attention.

If you want to make sure you’re buying smart and avoiding the upcoming price hikes, check out my Car Buying Course, which walks you through everything from financing tips to how to spot a bad deal in a high-pressure market.

And if you're subscribed to The Straight Shift newsletter, keep an eye out—I'll be breaking down which vehicles qualify for the new deductions and which ones are about to get a lot more expensive.