What Does a Second Trump Administration Mean for Electric Vehicles?

   

 The Equation Read More 

For the past decade (minus COVID years), I’ve been able to attend the annual Los Angeles Auto Show. In that time, I’ve watched the electric vehicles available to consumers improve and the offerings grow— from a few low-volume models with limited range and features in 2015 to today’s marketplace where prospective buyers can get everything from an electric Mini Cooper to a three-row Rivian SUV with range over 400 miles on a charge. The EV market has become increasingly dynamic, with domestic and foreign carmakers bringing better products to showroom floors and people’s driveways.

This year I’m as interested as ever to see what new options will be unveiled. But in the background will be the uncertainty of a second Trump administration and what it might mean for EVs in the US. What we do know is that the results of the election are troubling for UCS and our clean transportation work. This change in administration will likely be a large setback for reducing air pollution from transportation and slowing climate change, and this includes the transition from gasoline vehicles to electric vehicles, if the campaign rhetoric from Trump and Vance is any indication.

At the same time, there are limits to what this incoming administration can do to slow down progress on EVs and we’re not going back to a world without electric vehicles no matter what happens inside the White House. And we are closing out the year with more EV sales than ever before, both in the US and globally.

Car companies need to build cars that sell in a world that is going EV and need to be ready for a post-Trump marketplace here in the US. While it might work in the short-term for US domestic automakers to slow down on EVs, that would put those companies at a tremendous disadvantage as Asian and European carmakers expand their EV offerings and drive down production costs. New tariffs could protect the domestic industry for a short time (at the cost of higher prices for all car buyers), but the long-term impacts could be disastrous if they are unable to sell vehicles abroad and become reliant on market-distorting barriers to keep domestic sales going. EVs already made up about 20% of new car sales in the EU in 2023 and sales in China are at 50% of new passenger vehicles. As other countries look to phase out gasoline and diesel vehicles, automakers that don’t offer electric models will face a shrinking global market for their products.

For the US market, the high tariffs proposed on the campaign trail would make it more expensive to buy imported EVs and some models will likely not be available in the US, reducing options for US drivers and making it harder to switch from gasoline to electricity.

The US has tried important restrictions on autos before. In the 1980s, Japanese automakers were making quality cars with better fuel economy and selling them in the US at a lower price than domestic manufacturers could achieve, causing US automakers to lose market share and record significant financial losses. Import restrictions on Japanese autos gave US automakers some ability to catch up, but at the cost of higher prices for US buyers of both Japanese and domestic cars. It also led to Japanese companies opening manufacturing facilities in the US to avoid the restrictions (including a joint venture between General Motors and Toyota in Fremont, California that later became Tesla’s first mass production facility).

However, there is currently significant pushback against foreign investment in US EV and battery manufacturing facilities. If domestic automakers don’t ramp up EV manufacturing and foreign investments don’t come (or are prohibited), then the US market and automakers will fall behind the rest of the world. Trade barriers could make that viable in the short run, but eventually the innovation happening elsewhere will make this situation untenable and threaten the long-term survival of automakers reliant on gasoline vehicles rooted in last century’s technology.

The investments in electric vehicles and charging infrastructure made during the Biden Administration under the Infrastructure Investment and Jobs Act and Inflation Reduction Act have been important to the growth of EV sales and manufacturing capacity.

Federal investments in EV and battery manufacturing are spread out over many states (including “red” states) and will take work to undo, but executive action could make them harder to access. For example, Ford has received a loan of up to $9.2 billion to construct battery manufacturing plants in Kentucky and Tennessee. Before the election, 18 Republican members of Congress called for keeping the IRA’s “energy tax credits”, particularly those which were used to justify investments that already broke ground.” Their letter did not specifically note EV manufacturing incentives. But given that the House of Representatives is closely divided, only a few holdouts could block repeal of these investments.

The federal EV tax credits for vehicle purchases are likely to be more at risk. The EV tax credits have been important to helping car buyers make the switch to an EV.  As of October 2024, over 300,000 EV purchases have used the credit and the current administration estimates total consumer savings on fuel and maintenance of up to $6.3 billion. While eliminating the credits would also need legislation, the requirements and implementation of the credits could be made more restrictive, effectively closing off access to many EV buyers even before potential legislative action ends the credits. Reducing the availability of the credits will likely slow the adoption of EVs, especially lower-priced EVs that are just now starting to become available for more price-sensitive buyers. And slowing demand for EVs by restricting or eliminating the tax credit could imperil some of the EV jobs and manufacturing capacity already in place or coming online soon.

Federal standards on vehicle emissions that are designed to reduce climate pollution by over seven billion tons will be attacked, as will California’s authority granted by the Federal Clean Air Act to require lower emission vehicles than the federal standards. This includes the Advanced Clean Car II (ACCII) standards adopted by the California Air Resources Board in 2022 that require manufacturers to sell increasing amounts of zero emission vehicles, reaching 100 percent fuel cell, battery electric, or plug-in hybrids by 2035.

California and other clean car states will need to use all channels available to protect their ability to require clean cars, including getting the EPA to grant a waiver allowing for the implementation of ACCII prior to the inauguration next January.

But even if regulations are threatened or delayed by the administration or hostile courts, states can take action to increase the availability of EVs. For example, states can provide incentives for new and used EV sales, especially helping lower-income drivers and people that are driving older gasoline vehicles that are the most polluting.

Automakers have a choice to make. They can continue to move forward and build the electric vehicles that will meet the needs of drivers and our environment, or they can put short-term profits first. Already we have seen Toyota come out against EV targets, calling California’s vehicle standards unachievable, despite the state already hitting 25% EV sales. It may be challenging for Toyota to make the transition to EVs as they have consistently resisted selling EVs, with less than 3% of Toyota sales in California in 2023 being fully electric vehicles. However, other automakers that made more compelling EVs available have fared much better. For example, over 22% of Hyundai vehicles sold in California were fully electric vehicles. At a time when we are seeing climate change damage from drought, wildfire and more severe storms, we can’t afford to go backwards on vehicle emissions standards.

EV sales and the number of models available will likely continue to grow, even with potential barriers from the next administration. Despite the misleading rhetoric, nobody is being forced to buy an EV, so continuing to have good electric cars that buyers seek out is important for the industry, regardless of the messaging from the president-elect and his advisors.

In fact, Florida and Texas are currently top states for EV sales behind California, despite lack of state support and outright climate science denial in the case of Florida’s governor. It’s because buyers want these EVs, and companies that make electric vehicles that meet buyers’ needs at an affordable price will succeed even if there are policy headwinds from the federal government.

Will a second Trump administration “kill” EVs? No. The decisions of the next administration could slow down the transition from gasoline to electricity in the US (maybe), but it is not going to be a U-turn to the past.

The more important question is what will happen to the domestic auto industry if there is a mismatch between the future of transportation and federal manufacturing and innovation policies that are stuck in the past. We don’t know the answer to that question, but the automotive industry’s troubles with the inability to produce fuel efficient vehicles in the late 1970s and  2000s provide ample warning that failing to invest in technological progress can have dire consequences.