If President Trump has his way, the auto industry’s transition to electric vehicles could quickly be reversed. He would eliminate tax credits for purchasing electric vehicles, federal subsidies for chargers, and grants and loans to help retrofit assembly lines and build battery factories.
The executive order Trump issued on Inauguration Day completely negates the centerpiece of former President Joseph R. Biden Jr.’s multibillion-dollar climate change program, which Republicans campaigned to ban gasoline-powered cars. It turns out.
The order also poses a challenge for automakers, which have invested billions of dollars in electric vehicles, encouraged in part by the Biden administration. But some of the orders appear to bypass Congress and the federal rule-making process, potentially exposing them to lawsuits and resistance from within the Republican Party.
The order was framed as a way to revive the U.S. auto industry, but it could leave U.S. automakers falling behind if they scale back their electric vehicle programs while Asian and European automakers continue to perfect electric vehicle technology. Analysts say there is a possibility that the Already, 50% of car sales in China are electric or plug-in hybrid vehicles, and Chinese automakers such as BYD are selling even more cars around the world, with customers from existing car companies including U.S. manufacturers. are taking away.
The executive order signed by the president on Monday, titled “Freeing America’s Energy,” directs the auto industry to spend money appropriated by Congress as part of Biden’s effort to push tailpipe-emission-free vehicles. It is directing federal agencies to stop the operation immediately. Among other things, the funding helped states install fast chargers along major highways.
Biden’s main climate law, the Control Inflation Act, also provided tax credits of up to $7,500 for buyers of new electric vehicles and up to $4,000 for buyers of used models. This credit effectively made the purchase cost of some electric cars nearly equivalent to the price of a car with a gasoline or diesel engine.
Trump also rescinded Biden’s ambitious executive order that called for 50% of new cars sold in 2030 to be fully electric, plug-in hybrid, or powered by hydrogen fuel cells. Ta.
Trump also said his administration would seek to strip California of its authority to set air quality standards that are stricter than federal regulations. It will have far-reaching implications. California aims to have 100% of new car sales be electric by 2035, and some of its standards are being copied by at least 17 other states.
“The impact of this will be significant,” said Shay Natarajan, a partner at Mobility Impact Partners, a private equity firm that invests in sustainable transportation.
If demand for electric vehicles slumps, as it has in Germany and other countries with reduced incentives, automakers could be left with costly and underutilized electric vehicle and battery factories, he said. did.
“Accessing federal funding for EV and battery manufacturing will become more difficult, increasing the risk of defunding manufacturing projects already underway,” Natarajan said in an email.
Representatives of the fossil fuel industry praised the president’s action, but environmentalists lamented it was a significant setback in efforts to reduce greenhouse gas emissions and urban air pollution from automobiles. .
“Today is a new day for American energy,” Mike Somers, president of the American Petroleum Institute, said in a statement. I commend it.” Not restricted. ”
“Rolling back vehicle emissions standards is bad for our health, our wallets, and our climate,” said Katherine Garcia, a transportation expert with the Sierra Club. I’m going to fight.”
But its ultimate impact may not be as far-reaching as the aggressive language of Trump’s executive order suggests.
Funding to promote the sale and manufacture of electric vehicles is enshrined in the law and cannot be unilaterally abolished by the president. Trump also cannot, with the stroke of a pen, undo the rules set by the Treasury Department and other government agencies to determine how funds are distributed. Any attempt to bypass the arduous process of proposing new regulations, such as soliciting public comment, will almost certainly invite legal challenges.
The Department of Energy has agreed to lend billions of dollars to automakers like Rivian, which will receive $6 billion to produce electric sport utility vehicles at a factory near Atlanta. Some of the loan agreements were finalized in the waning days of the Biden administration and are binding contracts.
Much of the money is going to congressional districts in states like Georgia, Ohio, South Carolina and Tennessee, where Republicans dominate local politics. Their representatives may be hesitant to repeal laws that have brought jobs and investment to the district. That’s a challenge for Republican leaders, who hold slim majorities in the House and Senate.
Ultimately, individuals and families decide which car to purchase. Electric cars and plug-in hybrids are gaining market share not only thanks to subsidies, but also because of rapid acceleration and lower fuel costs. Fossil fuel-powered cars are losing market share, but that could change if financial incentives are removed from battery-powered cars and trucks.
The sudden change in political direction is causing confusion for automakers. Some may welcome the president’s promise to roll back emissions and air pollution standards that force manufacturers to sell more electric cars than they would like. But eliminating federal aid could derail financial plans at a time when most businesses are struggling to make or increase profits.
The shift in electric vehicle policy adds to an atmosphere of uncertainty and risk heightened by the president’s promise to impose 25% tariffs on products from Canada and Mexico, major suppliers of cars and auto parts to the United States. It’s increasing.
Carl Weinberg, chief economist at High Frequency Economics, said in a note to clients on Tuesday that the U.S. auto industry “would be crushed by this level of tariffs on finished vehicles and parts.”
Some automakers appeared to praise the president’s actions, while others rejected the gesture.
Stellantis, which owns brands such as Dodge, Jeep, Ram and Chrysler, said in a statement: “We are very encouraged by President Trump’s clear focus on policies that support America’s strong and competitive manufacturing base. ” he said.
General Motors CEO Mary T. Barra on Monday congratulated Trump on the X, saying the company “looks forward to working together toward our common goal of a strong U.S. auto industry.” ” he said.
There is no indication that Elon Musk, Tesla’s chief executive and head of what Trump calls the Department of Government Efficiency, is using his influence to blunt the attack on electric cars. Tesla accounts for just under half of all electric vehicles sold in the U.S., and nearly all of its vehicles qualify for the $7,500 tax credit.
Four of the 16 cars and trucks that can be purchased with the help of this tax break are Tesla-made. GM is the only automaker with five eligible models. No other company has more than one eligible vehicle.
Musk has previously said the government should eliminate all subsidies and that Tesla would suffer less than other automakers. But analysts say Tesla’s sales and profits would take a big hit if Mr. Trump succeeds in repealing or cutting policies like the electric vehicle tax credit and California’s clean air exemption.
Tesla did not respond to a request for comment.
During an appearance before Trump supporters in Washington on Monday, Musk, who is also SpaceX’s chief executive, was elated that the president had promised to send astronauts to Mars. “Can you imagine how amazing it would be for astronauts to plant the flag on another planet for the first time?” Musk said. He didn’t mention cars.
