Trump’s war on electric cars has only just begun

Just to start out: the federal EV tax credit is still alive and kicking. It was not eliminated by the stroke of Donald Trump’s pen because it can’t be. The tax credit — $7,500 for a new EV, $4,500 for a used one — was passed by Congress as part of the Inflation Reduction Act, and it would take another act of Congress to do away with it. 

Now the bad news: at Trump’s behest, Congress is very likely to do away with the tax credit at some point in the near future. Republican lawmakers have tried several times in the past to kill the credit, most recently in July 2024. But with Democrats in control of the Senate, and Joe Biden in the White House, none of those efforts ever went anywhere. 

Now Republicans have full control of Washington. And the tax credit appears headed for the trash bin. But that will take time, as will Trump’s efforts to rollback tailpipe emission rules. There will need to be deals struck, legislation written, public comment solicited, hearings scheduled, and more. How much time it all takes depends on how aggressive Trump and the Republicans want to be in unspooling Biden’s EV legacy. It’s very likely that Congressional sluggishness, as well as some Republican pushback, result in the incentive still being in the tax code by the end of the year. 

Trump’s first-day executive order blitzkrieg provides some hints about what’s to come for the auto industry. As does a menu of potential spending offsets proposed by House Republicans, which includes a new fee for EVs and the elimination of a tax credit loophole for leasing them. For better or worse, Biden made EVs a centerpiece of his multi-billion dollar effort to reduce carbon emissions, and now Trump and the Republicans are aiming to reverse as much as they can. In the end, their efforts will make buying and owning an EV more expensive, which will have profound effects on the auto industry, consumers, and the environment. 

“It’ll be hard to say how the auto industry will respond to that,” said Kathy Harris, director of clean vehicles at the Natural Resources Defense Council. “But I think what we’ve seen is that these regulations for decades, as EPA has put them out, have really provided significant benefits to not only the auto industry, but also to Americans, to Americans’ wallets, and to public health as well.”

You’ll notice that the auto industry doesn’t seem especially exuberant about the changes. While all the billionaire moguls of Silicon Valley came out to celebrate Trump’s inauguration, the Big Three automakers of Detroit kept their distance. The only one to make the trek to DC to kiss the ring was Stellantis chair John Elkann — and even he split before the inauguration to fly back to Italy to hang with F1 star Lewis Hamilton. (Who could blame him?)

Automakers are pleading for stability, but they’re likely to get everything but. Trump’s threats to eliminate EV incentives may dampen sales, but the president’s plan to impose 25 percent tariffs on Mexico and Canada could prove to be even more disastrous. Global supply chains are extremely complex, running through many different countries and across borders, and new fees could force companies to start the arduous process of re-engineering those lines. Trump’s position is that tariffs will force automakers to bring more manufacturing to the US and create jobs. But most experts are predicting price increases — and if cars become more expensive, sales will drop, forcing dealers, suppliers, and manufacturers to start weighing job cuts. 

Trump could confront resistance from his own party. A letter sent to House Speaker Mike Johnson in August 2024, signed by 18 Republicans, warned that “[p]rematurely repealing energy tax credits… would undermine private investments and stop development that is already ongoing.” The members represent states with some of the highest levels of clean energy investments as a result of the IRA.

It certainly doesn’t help that the auto industry was already trying to put out multiple fires before Trump even set pen to paper. The pandemic-era boom in sales has given way to a post-covid slump, and many companies are left feeling hungover. After slashing nearly 9,000 jobs, Nissan is trying to merge with Honda to buttress itself against fast-growing Chinese automakers. Volkswagen is struggling to keep factories open in Europe, while plowing billions of dollars into a new joint venture with struggling Rivian. Stellantis’ CEO quit after sales dropped. Even Tesla, the sole automaker to align itself fully with Trump, experienced its first sales decline in over a decade. And while CEO Elon Musk is making what German newspapers have called Nazi salutes, Tesla’s brand is shedding billions of dollars in brand value. 

While most of the executive orders were just about shock-and-awe, they are also setting in motion more meaningful policy changes to come. In addition to the EV tax credit, Trump is also targeting Biden’s tailpipe emission and fuel economy standards, as well as California’s waiver under the Clean Air Act to set its own emission rules. Most of this he tried during his first term, to mixed results.

“The executive order is simply directing the agencies to take a look at the regulations,” Harris said. “So, I think within 30 days is the deadline of when the agencies need to report back with a list of regulations for review.”

What happens next is anyone’s guess. Will EV sales flatline? Will VW acquire Rivian? Will the Nissan-Honda merger collapse? Will Stellantis go bankrupt? Will Republicans lawmakers, whose districts are actively benefiting Biden’s EV investments, force Trump to reconsider rolling back EV incentives? Will Musk stay in Trump’s good graces long enough to cash out? 

The only thing we can count on is legal challenges. Trump’s Day One executive orders don’t provide any concrete policy actions on the EV tax credit, emissions rules, or manufacturing incentives. But once those start to take form, you can be sure a wave of lawsuits will follow.