In a recent CNBC interview from a Ford plant in Avon Lake, Ohio, U.S. Transportation Secretary Sean Duffy touted the Trump administration's push for American manufacturing. "We want investments in America, not China," he declared, highlighting a new incentive: up to $10,000 in tax relief for buyers of U.S.-assembled vehicles. But here's the catch—it's not a direct credit, as some announcements suggest, but a deduction on auto loan interest for new cars bought between 2025 and 2028. This comes amid the phase-out of the longstanding $7,500 federal tax credit for electric vehicles (EVs), which ended on September 30, 2025, under the One Big Beautiful Bill Act.
So, which is better for the auto industry? Let's break it down.
The $7,500 EV credit, part of the Inflation Reduction Act, was a point-of-sale rebate that directly slashed the price of qualifying plug-in EVs and fuel-cell vehicles. It applied to models like the Tesla Model 3, Chevrolet Bolt, and Ford Mustang Mach-E, provided they met battery sourcing and North American assembly rules. Income caps limited it—$150,000 for singles, $300,000 for joint filers—and vehicle prices topped out at $55,000 for cars or $80,000 for SUVs/trucks. This incentive supercharged EV adoption, boosting sales by over 50% in recent years and funneling billions to manufacturers like GM, Ford, and Tesla. It spurred innovation in battery tech and supply chains, creating jobs in states like Michigan and Tennessee. However, critics argued it distorted the market, favoring EVs (which make up just 8-10% of U.S. sales) while ignoring gas-powered vehicles that dominate the roads.
Now, the $10,000 deduction shifts gears. It covers interest on loans for any new U.S.-built vehicle under 14,000 pounds—think Ford F-150s, Chevy Silverados, or even Toyotas assembled in Kentucky. No need to itemize; it's an above-the-line break available even on standard deductions. But it's not $10,000 off your taxes—it's a deduction on interest paid. For a $40,000 loan at 6% over five years, annual interest might hover around $2,000-$3,000 early on, saving $400-$900 in taxes depending on your bracket (e.g., 22-37%). Phase-outs kick in above $100,000 income ($200,000 joint). Proponents say it broadens appeal, potentially lifting overall new-car sales by 5-10%, per industry estimates, and supporting legacy automakers and unions like the UAW. It could revive slumping demand amid high interest rates and inflation, keeping factories humming and jobs stateside.
Yet, is this a game-changer?
What do you think, readers? Does the EV credit's focused boost outweigh the deduction's wider net for sustaining the car biz long-term? Or is inclusivity key to American auto dominance? Sound off below—your take could drive the debate.