With the recent election of Donald Trump to the presidency, the electric vehicle (EV) industry is bracing for significant changes. Industry experts warn of increased uncertainty for auto manufacturers, especially as Trump’s administration is expected to roll back many initiatives supporting the shift toward EVs. This could have serious ramifications for automakers, particularly for those based in Detroit, as they gear up for what they hope will be greater market penetration of electric models.
After his victory over Kamala Harris, many industry watchers expressed concern about the future of EV policies aggressively pushed under the previous administration. Trump’s administration may reduce the pressure on traditional automakers to create fuel-efficient vehicles, reinstigated by Biden’s Inflation Reduction Act (IRA), which provided substantial subsidies to accelerate EV adoption. Some analysts believe Trump could limit or even eliminate the financial incentives contained within the IRA, impacting the competitive edge of manufacturers reliant on such supports.
Returning to the White House, Trump may seek to revoke the $7,500 EV tax credit, which would deal “a gut punch” to companies like Ford and GM, both of which have invested heavily to electrify their offerings. “Tesla won’t feel the loss as much because they have the sales volume to keep prices low without needing the credit,” said Dan Ives from Wedbush Securities. “For GM and Ford, losing the credit could hurt their EV initiatives significantly.”
Concerns have also emerged surrounding the broader economic impacts of potential tariffs Trump has threatened to impose, particularly on imported auto parts which many American manufacturers rely on. Industry insiders predict these tariffs might backfire, leading to job losses among component suppliers and raising car prices for consumers already facing high costs for new vehicles.
According to Erik Gordon, professor at the University of Michigan, “Tariffs will likely boost domestic jobs at suppliers but raise costs for buyers, driving more people to keep their old cars longer. That could benefit the service industry but won’t be good for new car sales.”
There are also fears of diminished environmental regulations under Trump’s leadership. The president has long criticized policies aimed at reducing emissions. A revival of the less-stringent pollution controls his administration previously enacted could jeopardize the progress made by automakers focused on EVs. For example, under stricter regulations, companies face penalties if their vehicle offerings fail to meet emissions targets.
Adding insult to injury, the automotive industry’s shift toward EVs is not just about automakers adapting production but also includes the extensive supply chain involved, from battery supply to charging infrastructure. With concerns looming over lower investments due to potential policy reversals, many analysts predict companies might choose to convert plants initially meant for electric vehicles back to producing more traditional combustion engine models, which are still more profitable at this stage.
Trump's presidency could also complicate international relations, especially with Canada, which has positioned itself to be a key player in the EV supply chain. Having garnered over $50 billion of EV-related investments recently, any moves Trump makes to diminish the US-Mexico-Canada automotive agreement could lead to lasting damage for Canadian manufacturers and American companies relying on Canadian-made vehicle parts.
A looming question is whether the incoming administration will undermine the burgeoning auto markets established by the IRA. Automotive analysts at GlobalData have already revised their EV market share expectations for the U.S., forecasting it will fall from 33% to 28% by 2030 as consumer interest might wane without governmental encouragement. Other markets, like the UK and China, continue to expand rapidly, highlighting the risk of U.S. manufacturers falling behind.
Meanwhile, automakers like General Motors and Ford are reevaluing their strategies, acknowledging the possible reduction of EV models as Trump’s expected policies become reality. Automakers may also divert attention to developing hybrid vehicles, potentially positioning them as the middle ground between traditional combustion engines and full EVs.
Subaru is another example of how tricky this transition can be. The brand recently decided to forgo updating its beloved WRX STI model, recognizing the profitability struggles against government emissions mandates. This trend is echoed across many automakers, as they increasingly address the fallout from regulations constraining performance models. “With the regulatory environment as it stands, vehicle offerings must also shift accordingly,” said Subaru’s product line manager, Chris Charles.
Every decision made by the Biden administration and its successors can create ripple effects. Trump’s presidency could have potentially severe impacts, causing Detroit automakers and the American EV industry at large to reevaluate their plans and possibly reverse course, leaving the door open for international competitors to seize market share.
To navigate these uncertain waters, U.S. EV manufacturers, from the big three to smaller startups, will likely need to advocate fiercely for policies conducive to sustaining their market presence. The stakes have never been higher as they forge forward during this unpredictable chapter.
