H.R. 1293: Vehicle Energy Performance Act of 2025

This bill, titled the "Vehicle Energy Performance Act of 2025," introduces changes to the United States tax code to promote better fuel economy in motor vehicles. It primarily establishes tax credits for certain high-energy performance vehicles and imposes fees on vehicles that fall below specific fuel economy standards.

Tax Credit for High-Energy Performance Vehicles

The bill proposes a tax credit for the purchase of new qualified high-energy performance motor vehicles. Here are the main points regarding the tax credit:

• The tax credit can be up to $5,000, depending on the energy performance of the vehicle compared to the median performance of similar vehicles from the previous model year.
• A "qualified high-energy performance motor vehicle" is defined as a passenger car or light truck that meets certain criteria, including:
• It must achieve better energy performance than the median rating for the prior model year.
• It must be produced by a manufacturer starting from the model year 2027.
• It must be used by the taxpayer and not for resale.
• The credit can be treated as a refundable tax credit, meaning it can be transferred to the vehicle seller at the time of purchase, helping to reduce the upfront cost for the buyer.

Low Vehicle Energy Performance Fee

The bill also introduces a fee for vehicles considered to have low energy performance. This fee is calculated based on the difference between the vehicle's performance and the median performance of similar vehicles from the previous model year. Key components include:

• The fee will start at $5,000 and will be adjusted based on how much a vehicle's performance falls short of the median performance.
• A "low energy performance vehicle" is defined as one whose fuel economy is below the median performance level of similar vehicles and that is manufactured starting from the model year 2029.
• Certain vehicles, such as those designed for commercial use or government emergency use, may be exempted from this fee.

Reporting Requirements

Under the bill, vehicle manufacturers are required to report annually on the energy performance ratings of their models. These reports will help establish standards for fuel economy and inform consumers about vehicle performance. The Department of the Treasury will also publish median and best vehicle performance data annually.

Fuel Economy Measurement for Dual-Fuel Vehicles

The legislation includes provisions to improve how fuel economy is measured for dual-fuel vehicles (vehicles that can run on more than one type of fuel). Key details include:

• The Administrator of the relevant government agency will have mandatory responsibilities to review fuel economy data and update the measurement formula at least every three years, starting from the model year 2026.
• The fuel economy labels on dual-fuel vehicles must provide information on fuel consumption when using both types of fuel.

Inflation Adjustments

The bill proposes that the tax credit amounts and fees will be adjusted for inflation starting from applicable model years post-2027.

Implementation Timeline

As per the bill, changes related to the tax credits will begin with vehicles manufactured in or after the model year 2027, while the low vehicle energy performance fee will apply to cars from model year 2029 and beyond.

Connection to Existing Environmental Standards

Only vehicles that comply with the Clean Air Act and safety regulations will qualify for the credits specified in the bill. The Secretary of the Treasury, in coordination with other relevant federal authorities, will be responsible for developing specific regulations necessary for implementing this act.

Relevant Companies

• Ford Motor Company (F) - As a major manufacturer of light trucks and passenger cars, Ford could be impacted by this legislation, particularly in terms of vehicle designs that comply with the new performance standards.
• Tesla, Inc. (TSLA) - Tesla's electric vehicles may benefit from the tax credits; their performance ratings could position them advantageously under the new program.
• General Motors Company (GM) - Similar to Ford, GM will need to adapt its vehicle offerings to align with the requirements set forth by this bill for tax incentives.
• Volkswagen AG (VWAGY) - As a global automaker, Volkswagen's models will need to meet the new energy performance standards to avoid the low performance fee.