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On the campaign trail, Donald Trump said a lot of things about electric vehicles. He said he would “end the electric vehicle mandate on day one,” that EVs “don’t work,” and that they benefit China and Mexico while hurting American autoworkers.
But he has also closely aligned himself with Elon Musk, who runs the biggest EV company in the US. And he will likely have Musk continuing to whisper in his ear on important policy matters moving forward, even going so far as to promise to appoint the mercurial billionaire to a role in his administration.
So now that he’s the president-elect, what will he actually do that will affect the auto industry and its tenuous shift to electric vehicles?
First off, he said he would “rescind all unspent funds” in President Joe Biden’s Inflation Reduction Act, which includes many of the administration’s efforts to incentivize EV production in the US. Trump is likely to kill these incentives, everything from the EV tax credit to incentives for battery factories and mining.
It could prove to be an unpopular move, as the tax credits have been shown to work. The Biden administration claims that the tax credits have been successful, saving car buyers $1 billion in 2024 alone. The credit can now be applied at the point of sale, meaning shoppers can accept a discount on their EV purchase directly from dealers. And EV sales are continuing to increase, growing 11 percent year over year in the third quarter of 2024, according to Cox Automotive.
Eliminating these tax credits and incentives will make EVs more expensive to buy for many Americans, which will likely result in fewer vehicles sold. Manufacturers will have to adjust their plans to account for the less generous tax environment. Any factory that has yet to break ground is in jeopardy.
But making cars is expensive, and development cycles last for years. Automakers will be lobbying hard for regulatory certainty — whether Trump pays heed is entirely up in the air.
“Depending on how much [the individual tax credit] would be changed, it could be very detrimental to the North American automotive industry,” Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, told Automotive News. “A lot of the demand for EVs currently is driven by that incentive, and that incentive feeds the manufacturers.”
Trump could also kill the National Electric Vehicle Infrastructure (NEVI) program to install more EV chargers. However, at least 14 percent of NEVI funds have gone directly to Tesla, which is the largest provider of EV charging in the US. It’s unclear whether Trump would axe a program that benefits his new BFF. But Musk has spoken disparagingly of NEVI, so it’s certainly a possibility.
Some Tesla investors say that while the new Trump administration is likely to be a negative for the auto industry, it could end up working out for Musk, who famously went all in for Trump, spending over $119 million to support his campaign.
“Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment,” said Wedbush analyst Dan Ives, “coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the US market over the coming years.”
Trump is likely to attempt to roll back or weaken the Biden administration’s new tailpipe emission standards, which would slash greenhouse gas emissions in half by 2032. This is likely what he’s talking about when he rails against the “EV mandate.” Republicans have falsely portrayed the new standards as a ban on gas-powered cars. EVs would need to account for over half of new vehicle sales for automakers to meet these strict mandates.
If that happens, expect automakers to tap the brakes on EV production. That will likely result in Detroit’s Big Three — Ford, General Motors, and Stellantis — becoming less competitive globally, as the rest of the world continues to innovate and produce more EVs. It could also open the door for foreign automakers to come in and snap up the market. Tariffs could deter countries like China from flooding the US with cheap EVs, but that could be short-lived if China keeps making cheaper and cheaper EVs.
Trump’s plan to slap tariffs on a variety of imported goods, including foreign-made cars, could make many vehicles more expensive to buy. Shares in BMW, Mercedes-Benz, and Porsche all fell on Germany’s stock market on the news of Trump’s victory on Wednesday. Meanwhile, stock prices in the Big Three, as well as Tesla, surged in early trading.
California’s right under the Clean Air Act to enact stronger emission standards is also likely to fall in Trump’s crosshairs, as it did last time he was in office. This could become another rat’s nest of lawsuits and counter lawsuits. Trump will be spoiling for a fight.
Fighting — over tax credits, emission standards, federal spending, state’s rights, and more — will become a hallmark of this presidency and its approach to the auto industry, just as it was last time. But this time around, EVs are becoming mainstream, and a lot of the investments can’t just be unspooled. Climate change is a looming threat, and EVs are seen as an important tool to fighting it. This time, there’s just a lot more at stake.
