If President Trump has his way, the auto industry's transition to electric vehicles will soon be reversed abruptly. It will eliminate tax credits for the purchase of electric vehicles, federal subsidies for chargers and subsidies and loans to help restructure assembly lines and build battery factories.
The executive orders issued by Trump on Inauguration Day amount to a broad repudiation of a centerpiece of former President Joseph R. Biden Jr.'s multibillion-dollar program to address climate change, which Republicans cast as a push to ban cars. of gasoline.
The orders also present a challenge to automakers that have invested billions of dollars in electric vehicles, in part because the Biden administration encouraged them to do so. But some of the orders appear to bypass congressional or federal rulemaking procedures, which could make them vulnerable to lawsuits and even resistance within the Republican Party.
While framed as a way to revive the U.S. auto industry, the orders could cause U.S. automakers to fall behind if they scale back their electric vehicle programs as Asian and European manufacturers continue to refine the technology, analysts say. Already 50 percent of car sales in China are electric or plug-in hybrids, and Chinese automakers like BYD are selling more cars around the world, taking customers away from established auto companies, including American manufacturers.
An executive order titled “Unlocking American Energy” and signed by the president on Monday instructs federal agencies to immediately suspend the disbursement of funds appropriated by Congress that were part of Biden's effort to push the auto industry toward vehicles without exhaust emissions.
Among other things, the funds helped states install fast chargers along major highways and provided tax credits of up to $7,500 for buyers of new electric vehicles and $4,000 for buyers of used models. The credits effectively brought the cost of buying some electric cars roughly on par with the prices of cars with gasoline or diesel engines.
Trump also rescinded an aspirational executive order from Biden that required 50 percent of new vehicles sold in 2030 to be all-electric, plug-in hybrids or vehicles powered by hydrogen fuel cells.
And Trump said the administration would seek to revoke California's authority to set air quality standards that are stricter than federal rules. That would have a wide effect. California aims for 100 percent of new car sales to be electric by 2035, and some of its standards are copied by at least 17 other states.
“The impact of this will be significant,” said Shay Natarajan, partner at Mobility Impact Partners, a private equity firm that invests in sustainable transportation.
If demand for electric vehicles falters, as has happened in other countries such as Germany that cut incentives, he said, automakers could be left with expensive and underutilized electric vehicle and battery factories.
“Federal financing for electric vehicle and battery manufacturing will be more difficult to access, increasing the risk of stranded capital for manufacturing projects already underway,” Natarajan said in an email.
Representatives of the fossil fuel industry welcomed the president's action, while environmentalists lamented what they said was a serious setback to efforts to reduce greenhouse gas emissions and reduce urban air pollution caused by automobiles. .
“This is a new day for American energy,” Mike Sommers, president of the American Petroleum Institute, said in a statement, “and we applaud President Trump for moving quickly to chart a new path forward that embraces oil and American natural gas. not restricted.”
Katherine Garcia, Sierra Club transportation expert, said: “Rolling back vehicle emissions safeguards harms our health, our pocketbooks, and our climate. “We will fight him every turn of the way.”
But the ultimate effect may not be as broad as the blunt language of Trump's executive orders suggests.
Funds to promote the sale and manufacture of electric vehicles were enshrined in legislation that the president cannot unilaterally repeal. Nor can Trump repeal the rules that the Treasury Department and other government agencies established to determine how money would be distributed simply with the stroke of a pen. Any attempt to short-circuit the laborious process of proposing new regulations that includes seeking public comment will almost certainly invite credible legal challenges.
The Energy Department agreed to lend billions to automakers like Rivian, which will receive $6 billion for a factory near Atlanta to produce electric sport utility vehicles. The loan agreements, some finalized in the final days of the Biden administration, are binding contracts.
Much of the money has gone to congressional districts in states such as Georgia, Ohio, South Carolina and Tennessee, where Republicans dominate local politics. Their representatives may hesitate to repeal laws that have brought jobs and investment to their districts. It is a challenge for Republican leaders fighting for slim majorities in the House and Senate.
Ultimately, individuals and families will decide which cars they will buy. Electric vehicles and plug-in hybrids are gaining market share not only thanks to subsidies, but also because they offer quick acceleration and lower fuel costs. Fossil fuel-powered cars have been losing share, although that could change if financial incentives for battery-powered cars and trucks are removed.
The abrupt change in political direction presents a dilemma for automakers. Some may welcome the president's promises to rescind emissions and air quality rules that force manufacturers to sell more electric cars than they would like. But eliminating federal subsidies could disrupt their financial planning when most are struggling to earn or increase profits.
The radical change in electric vehicle policies adds to a climate of uncertainty and danger accentuated by the president's promise to impose 25 percent tariffs on products from Canada and Mexico, which are major suppliers of cars and parts to the United States.
The U.S. auto industry “will be devastated by tariffs on assembled vehicles or parts at this level,” Carl Weinberg, chief economist at High Frequency Economics, said in a note to clients on Tuesday.
Some automakers appeared to applaud the president's actions, while others were noncommittal.
“President Trump's clear focus on policies that support a strong and competitive manufacturing base in the United States is enormously positive,” Stellantis, owner of Dodge, Jeep, Ram, Chrysler and other brands, said in a statement.
Mary T. Barra, CEO of General Motors, congratulated Trump on Monday for x and said the company “looks forward to working together on our shared goal of a strong American auto industry.”
There are no signs that Elon Musk – the CEO of Tesla and head of what Trump calls the Department of Government Efficiency – is using his influence to mitigate the attack on electric vehicles. Tesla accounts for just under half of the electric cars sold in the United States, and nearly all of its vehicles qualify for $7,500 tax credits.
Four of the 16 cars and trucks that can be purchased with the help of that tax break are made by Tesla. GM is the only automaker with more eligible models: five. No other company has more than two qualified vehicles.
Musk has previously said that the government should get rid of all subsidies and that Tesla would suffer less than other automakers. But analysts note that Tesla's sales and profits would be hit hard if Trump were successful in repealing or truncating the electric vehicle tax credit, California's clean air exemption and other similar policies.
Tesla did not respond to a request for comment.
During an appearance before Trump supporters in Washington on Monday, Musk, who is also the CEO of SpaceX, rejoiced that the president had promised to send astronauts to Mars. “Can you imagine how wonderful it will be for astronauts to plant the flag on another planet for the first time?” Mr. Musk said. He didn't mention cars.
