During the election campaign, Donald Trump said a lot about electric vehicles. He said he would “end the electric vehicle ban on day one,” that electric vehicles “don’t work,” and that they benefit China and Mexico but hurt American autoworkers.
But he has also become close with Elon Musk, who runs the largest electric vehicle company in the United States. And he will likely continue to whisper in Musk's ear about important future policy issues, even going so far as to promise to appoint the mercurial billionaire to a role in his government.
Now that he's the president-elect, what will he actually do that will impact the automotive industry and its tentative transition to electric vehicles?
First, he said he would withdraw “all unspent funds” in President Joe Biden's Inflation Reduction Act, which includes many government efforts to boost electric vehicle production in the United States. Trump is likely to kill these incentives, from the electric vehicle tax credit to incentives for battery factories and mining.
What will he actually do that will impact the automotive industry and its tentative transition to electric vehicles?
This could prove to be an unpopular move since tax credits are proven to work. The Biden administration claims 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, allowing buyers to receive a discount on their electrical purchase directly from the retailer. And electric vehicle sales continue to increase, rising 11 percent year-over-year in the third quarter of 2024, according to Cox Automotive.
Eliminating these tax credits and incentives will make electric vehicle purchases more expensive for many Americans, which will likely result in fewer vehicles being sold. Manufacturers will need to adjust their plans to reflect the less generous tax environment. Any factory that has not yet broken ground is in danger.
But making cars is expensive and development cycles take years. The car manufacturers will work intensively for regulatory security – whether Trump will pay attention to this is completely uncertain.
“Depending on how much [the individual tax credit] “If that changes, it could be very damaging to the North American auto industry,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions Automotive News. “A lot of the demand for electric vehicles is currently driven by this incentive, and this incentive feeds manufacturers.”
Trump could also end the National Electric Vehicle Infrastructure (NEVI) program to install more electric vehicle chargers. However, at least 14 percent of NEVI funds went directly to Tesla, the largest provider of electric vehicle charging stations in the United States. It's unclear whether Trump would cut a program that benefits his new best friend. But Musk has made disparaging comments about NEVI, so it's definitely a possibility.
Some Tesla investors say that while the new Trump administration will likely have a negative impact on the auto industry, it could also end up impacting Musk, who famously did everything for Trump, giving over $119 million to support his campaign has issued.
“Tesla has the scale and scale unparalleled in the electric vehicle industry, and this dynamic could give Musk and Tesla a clear competitive advantage in an environment without electric vehicle subsidies,” said Wedbush analyst Dan Ives, “coupled with likely higher China tariffs, “We will continue to deter cheaper Chinese EV providers (BYD, Nio, etc.) from flooding the US market in the coming years.”
Eliminating these tax credits and incentives will make electric vehicle purchases more expensive for many Americans
Trump will likely seek to roll back or weaken the Biden administration's new emissions standards that would cut greenhouse gas emissions in half by 2032. That's probably 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. To meet these strict requirements, electric vehicles would have to account for more than half of new car sales.
If that happens, automakers can expect to slow production of electric vehicles. That will likely cause Detroit's Big Three — Ford, General Motors and Stellantis — to become less competitive globally as the rest of the world continues to innovate and produce more electric vehicles. It could also open the door for foreign automakers to enter the market. Tariffs could stop countries like China from flooding the U.S. with cheap electric vehicles, but that could be short-lived if China continues to make ever cheaper electric vehicles.
Trump's plan to impose tariffs on a variety of imported goods, including foreign-made cars, could make many vehicles more expensive to buy. Shares of BMW, Mercedes-Benz and Porsche fell on the German stock market following news of Trump's election victory on Wednesday. Meanwhile, the share prices of the Big Three and Tesla rose sharply in early trading.
California's right under the Clean Air Act to adopt stricter emissions standards is also likely to be in Trump's crosshairs, as it was during his last term in office. This could become another rat's nest of lawsuits and counterclaims. Trump will be ready to fight.
The fight — over tax credits, emissions standards, federal spending, states' rights and more — will be, as it was last time, a hallmark of this presidency and its approach to the auto industry. But this time, electric vehicles are becoming mainstream, and many investments cannot be easily completed. Climate change is a looming threat and electric vehicles are seen as an important tool to combat it. This time there is simply a lot more at stake.