President Donald Trump kicked off his second term yesterday by signing numerous executive orders. Among them was a move targeting electric vehicles (EVs) — a clear shot at the Biden-era policies that fueled their growth. This marks the beginning of a major shift in the EV landscape.
Rolling Back Biden’s EV Targets
One of Trump’s executive orders, titled “Unleashing American Energy,” aims to pull down policies that favor EVs over traditional internal combustion engine vehicles. Trump criticized what he called an “EV mandate,” arguing that it restricted consumer choice and created market distortions. As part of this directive, he revoked a 2021 order from former president Joe Biden that set a non-binding target for EVs to make up half of all new vehicle sales by 2030.
Emissions Standards and State Waivers
Trump’s policy shift involves loosening emissions regulations, which will allow automakers to produce vehicles with higher pollution levels. The administration plans to reconsider rules requiring automakers to sell a specific percentage of EVs by 2032 to meet stringent emissions targets.
Trump is seeking to revoke a waiver granted to California that allows the state to enforce its zero-emission vehicle mandate by 2035. California’s rule, adopted by 11 other states, has been a driving force in pushing automakers toward electrification. Repealing this waiver could slow the pace of EV adoption in these states and create a fragmented regulatory landscape. This mirrors Trump’s actions in the first term when the Environmental Protection Agency rolled back stricter emissions regulations implemented under the Obama administration.
Funding Halted for Charging Stations
Trump’s order also halts the disbursement of unspent funds earmarked for EV charging infrastructure. This includes freezing the $5 billion allocated for charging stations under programs like the National Electric Vehicle Infrastructure Formula Program. The decision could disrupt the expansion of the U.S. charging network, which had been gaining momentum under the previous administration. Tesla TSLA had been a significant beneficiary of these programs. Notably, much of the funding had already been allocated to states due to the Biden administration’s accelerated efforts in its final days. Even then, the EV charging industry is expected to feel the heat with no government support.
Trump to Remove EV Tax Credits
On his campaign trail, Trump had consistently advocated for reducing regulations on the fossil fuel industry to “unlock American energy” while eliminating subsidies for EVs. Trump had cleared his stance that while he is not against EVs per se, he is certainly against funding expensive subsidies for them.
One of Biden’s signature policies under the Inflation Reduction Act (IRA) is the $7,500 EV tax credit, aimed at boosting clean energy adoption. However, a rollback of this tax credit is surely on the horizon, which could slow EV adoption. Affordability remains a key factor for consumers and removing these incentives might make EVs less accessible.
While EV sales growth has slowed compared to earlier projections, the sector is still the fastest-growing in the auto industry. According to Cox Automotive, battery-electric vehicle (BEV) sales reached 1.3 million in 2024, representing 8% of total vehicle sales in the United States.
While EV giant TSLA continued to dominate with a 50% market share, legacy automakers like General Motors GM and Ford F outpaced the broader EV market’s growth, securing second and third spots, respectively, in U.S. BEV sales in 2024. With Trump pushing for the removal of EV tax credits, automakers like Ford and General Motors, which have heavily invested in EV production despite not yet achieving profitability in the segment, are set to face challenges. Meanwhile, for Tesla, it’s not going to be a rough ride. The company has outgrown the need for such incentives, thanks to its massive scale and brand loyalty.
Critics argue that Trump’s rollback of EV-friendly policies could hinder the U.S. auto industry’s global competitiveness.In contrast, other regions are forging ahead with electrification. About half of new car sales in Europe last year were hybrid, plug-in hybrid, or fully electric, and China is expected to reach 50% EV sales share this year. By scaling back its EV ambitions, the U.S. risks falling behind in the global race for automotive innovation and market share.
Trump’s Tariffs Policies Also on the Way
In November, Trump pledged to impose a 25% tariff on all imports from Mexico and Canada on the very first day upon taking office. Although Trump’s first-day actions avoided imposing tariffs, he signaled that tariffs on foreign goods, including cars from Mexico and Canada, could be implemented by February. Notably, GM leads all U.S. automakers in car exports from Mexico and Ford is second on the list.
For decades, free trade agreements between the United States, Canada, and Mexico have shaped the North American auto industry, enabling automakers to build efficient, cost-effective supply chains across borders. However, tariffs threaten to disrupt this interconnected ecosystem. Such tariffs are expected to increase the cost of new vehicles, potentially dampening consumer demand. However, they may also encourage automakers to focus on domestic production, aligning with Trump’s broader “America First” agenda.
Conclusion
Trump’s actions on EV mandates prioritize deregulation and traditional energy sources over electrification. While some automakers may benefit from reduced regulatory pressure, the long-term effects on innovation and global competitiveness remain uncertain.
For U.S. auto giants Ford and GM, the picture is slightly mixed. Both have poured billions into EV development, motivated by regulatory incentives and shifting market trends. Now that EV tax credits are at the risk of being rolled back, the companies might need to rethink their EV strategies. However, since neither Ford nor GM currently profits from EV sales, a slowdown in EV adoption could actually benefit their bottom line by boosting sales of more profitable gas-powered vehicles. Tesla, despite potential challenges, is well-positioned to navigate these shifts due to its global scale and profitability.
As the U.S. pivots away from aggressive EV adoption goals, it risks losing its leadership in the global auto market to regions like Europe and China, which continue to double down on electrification. The coming years will determine whether this new direction promotes growth or leaves the U.S. auto industry playing catch-up on the global stage.
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