Analyzing the Impact of the IRA on EV Uptake in the USA

A critical time for clean transportation

These investments come at a critical time. The U.S. aims to reduce 23% of total U.S. greenhouse gas (GHG) emissions that come from road transportation. These provisions will speed progress towards EV and climate goals.

This study assesses the future impact of the IRA on electrification rates for LDV and
HDV sales in the United States through 2035. The study finds that the IRA tax credits will reduce light-duty EV purchase costs by $3,400 to $9,050 and projects how these changing costs and incentives will affect the LDV and HDV markets in the United States.

Figure ES-1 (below) shows the range of the study’s projected EV and ZEV sales shares for LDVs and HDVs from 2023 to 2035. It presents a Low, Moderate, and High scenario, compared to a baseline (no IRA incentives) scenario.

Conclusions and policy recommendations

The IRA will accelerate electrification. Both the light and heavy-duty sectors show rapid EV uptake, considering both expected manufacturing cost reductions and the IRA incentives, as well as state policies. By 2030, there will be a range of a 48%–61% EV sales share in the light-duty sector, increasing to 56%–67% by 2032, the final year of the IRA tax credits. For heavy-duty, the estimate is a range of 39%–48% ZEV sales share by 2030 and 44%–52% by 2032.

By providing thousands of dollars in financial incentives to LDV and HDV purchasers, the IRA unlocks widespread consumer benefits while furthering the administration’s decarbonization goals. With these incentives, EPA can set more stringent federal LDV and HDV GHG standards than would have been possible otherwise, at lower cost and higher benefit to consumers and manufacturers.

To meet climate goals, the IRA is not enough. Previous analyses show that higher rates of electrification than shown here will be necessary to meet the U.S. Nationally Determined Contribution (NDC) and to be aligned with the Paris Climate Agreement to limit global warming to well below 2 degrees Celsius.

Federal standards can lock in and build on the pace of electrification from the IRA. The EV and ZEV sales shares presented in this study are not guaranteed and there remains uncertainty in the electrification transition. To ensure the electrification momentum from the IRA continues, federal standards can serve as a backstop, particularly after the incentives expire in 2032. To deliver substantial climate benefits above the baseline, federal standards would need to drive electrification rates significantly higher than 50% by 2030 for LDVs and above 40% by 2030 for HDVs.

Government and industry need to take additional action. This analysis shows that, depending on costs and consumer preferences, electrification can be rapid. However, it does not account for other non-financial barriers, such as lead time for vehicle manufacturing and charging infrastructure development; challenges that are largest in the heavy-duty sector. The rates of electrification projected in this study can only be achieved if government and industry invest quickly in ZEV assembly and infrastructure.

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