Republicans in the House, led by Paul Ryan, unveiled a new tax code that eliminates the $7,500 EV tax credit.

If the Republican Party is supposed to be the friend of big business, the auto industry may need new friends after the unveiling of the new tax code proposal.

Though the new code does cut the taxation rate for corporations, it also eliminates the $7,500 tax credit for electric vehicles: a credit that automakers have been relying on to make the vehicles more palatable to every day consumers.

The Obama Administration established the credit to help spur sales. The credit can be applied to the first 200,000 electric vehicles sold by each carmaker. Combined with credits and rebate programs available in various states, EVs have become nearly as competitive on a pricing basis with gasoline- and diesel-powered vehicles. 

The move by the GOP comes has automakers are in the midst of a significant shift to electric vehicles to meet ambitious mileage and emissions requirements in the U.S. and other countries around the world, particularly China, which is pushing for complete conversion to EVs early next decade.

(Half the vehicles on U.S. roads will be electrified by 2030. To find out more, Click Here.)

EVs currently make up less than 1% of total sales in the U.S. and that’s in significant measure due to the incentives. Xavier Mosquet, senior partner at the Boston Consulting Group, said that if the incentive disappears so will sales of vehicles like the Tesla Model 3, Chevrolet Bolt and Nissan Leaf.

The move would actually put U.S. automakers including Tesla, as well as General Motors, Ford and Fiat Chrysler, at a competitive disadvantage with foreign makers whose home markets continue to offer such incentives. As a result, U.S. automakers and other have rallied to the defense of the credit.

“Automakers are offering more than 30 models of electric vehicles in dealer showrooms but they represented only 1% of overall sales last year,” said the Alliance of Automotive Manufacturers.

“There is no question that the potential elimination or phase out of the electric vehicle tax credit will impact the choices of prospective buyers and make it more challenging for manufacturers to comply with electric vehicle mandates in 10 states.”

The alliance represents most of the major makers in the U.S., including the former Big Three in Detroit: General Motors, Ford and Fiat Chrysler.

“We are also concerned about the fuel cell credit that expired in 2016. Both fuel cells and EVs are zero-emission vehicles that were eligible for federal tax credits. Eliminating the fuel cell and EV credits will hamper progress towards getting these very clean and energy-efficient vehicles on the road,” the group added.

The Electric Drive Transportation Association notes there are close to 40 models of plug-in and fuel cell cars are available to American drivers and options are expected to grow exponentially in the next three years, in letters sent to lawmakers.

Every major automaker in the U.S. now has at least one plug-in vehicle in the market and nearly all have announced plans for major investments in expanding electric offerings, the group added, noting the industry itself is burgeoning with more than 215,000 jobs and counting. It also helps to reduce the country’s dependence foreign oil.

Further, even with reduced imports, our energy and economic security is threatened by our dependence on a single transportation fuel: oil. According to the U.S. Energy Information Administration, the U.S. spent roughly $123 billion dollars on imported oil in 2016, the group noted.