If President Trump gets his way, the auto industry’s shift to electric vehicles will soon be reversed. It would eliminate tax credits for purchasing electric vehicles, federal grants for chargers, and subsidies and loans to help retool assembly lines and build battery factories.
Mr. Trump’s executive orders on Inauguration Day amounted to a blanket repudiation of former President Joseph R. Biden Jr.’s multibillion-dollar program to address climate change, which Republicans cast as a push to ban gasoline cars.
The orders also represent a challenge for automakers that have invested billions of dollars in electric vehicles, in part because the Biden administration has encouraged them to do so. But some orders appear to bypass congressional procedures or federal rulemaking, which could make them vulnerable to lawsuits and even resistance from within the GOP.
Although the orders are positioned as a way to revive the U.S. auto industry, they could cause U.S. automakers to fall behind if they scale back their electric vehicle programs while Asian and European automakers continue to master the technology, analysts say. Already, 50% of car sales in China are electric or hybrid vehicles, and Chinese automakers like BYD are selling more cars worldwide, alienating customers from established car companies, including American manufacturers.
An executive order titled “Unleashing America’s Power” and signed by the president on Monday directs federal agencies to immediately stop disbursing funds appropriated by Congress that were part of Biden’s efforts to push the auto industry toward zero-tailpipe-emission vehicles. Among other things, the funds helped states install fast chargers along major highways.
Biden’s major climate law, the Inflation Reduction Act, also provided tax breaks of up to $7,500 for buyers of new electric vehicles and $4,000 for buyers of used models. The credits have effectively made the cost of purchasing some electric cars nearly equal to the prices of cars powered by gasoline or diesel engines.
Mr. Trump also rescinded Biden’s ambitious executive order that called for 50 percent of new vehicles sold in 2030 to be fully electric, hybrids or hydrogen fuel cell vehicles.
Trump said the administration would seek to revoke California’s authority to set air quality standards more stringent than federal rules. This will have a widespread impact. California aims for 100% of new vehicle sales to be electric by 2035, and some of its standards are being copied by at least 17 other states.
“The impact of this will be significant,” said Shai Natarajan, a partner at Mobility Impact Partners, a private equity firm that invests in sustainable transportation.
She pointed out that if demand for electric cars declines, as happened in other countries such as Germany that reduced incentives, automakers may find themselves facing expensive and underutilized electric car and battery factories.
“Federal funding for electric vehicle and battery manufacturing will be difficult to access, increasing the risk of stranded capital for manufacturing projects already underway,” Ms. Natarajan said in an email.
Fossil fuel industry representatives celebrated the president’s action, while environmental advocates lamented what they said was a serious setback for efforts to cut greenhouse gas emissions and curb urban air pollution caused by cars.
“This is a new day for American energy, and we applaud President Trump for moving quickly to chart a new course in which American oil and natural gas are embraced, unrestrained,” Mike Sommers, president of the American Petroleum Institute, said in a statement.
“Rolling back vehicle emissions safeguards is bad for our health, our wallets and our climate,” said Katherine Garcia, a transportation expert at the Sierra Club. “We will fight him every turn of the way.”
But the ultimate impact may not be as broad as the strong language in Mr. Trump’s executive orders suggests.
The money allocated to encourage electric vehicle sales and manufacturing was allocated in legislation that the president cannot unilaterally repeal. Mr. Trump also cannot overturn the rules set by the Treasury Department and other government agencies to determine how money is distributed with just the stroke of a pen. Any attempt to obstruct the arduous process of proposing new regulations and obtaining feedback from the public will almost certainly result in credible legal challenges.
The Energy Department has agreed to lend billions of dollars to automakers like Rivian, which will receive $6 billion for a factory near Atlanta to produce electric sports cars. The loan agreements, some of which were finalized in the final days of the Biden administration, are binding contracts.
Much of the money has flowed to congressional districts in states such as Georgia, Ohio, South Carolina and Tennessee where Republicans dominate local politics. Their representatives may be reluctant to repeal laws that have provided them with jobs and investments in their areas. This poses a challenge to Republican leaders who are competing for a narrow majority in the House of Representatives and the Senate.
Ultimately, individuals and families will decide what cars to buy. Electric cars and hybrids are gaining market share not only because of subsidies, but also because they offer fast acceleration and lower fuel costs. Fossil-fueled cars have lost share, although this may change if financial incentives for battery-powered cars and trucks are removed.
The sudden shift in political direction presents a quandary for automakers. Some may welcome the president’s promises to roll back emissions and air quality standards that force manufacturers to sell more electric cars than they might want. But eliminating federal subsidies could derail their financial planning when most are struggling to earn or increase earnings.
This shift in electric vehicle policies adds to a climate of uncertainty and risk exacerbated by the president’s promise to impose 25 percent tariffs on goods coming from Canada and Mexico, the main suppliers of cars and auto parts to the United States.
The U.S. auto industry “would be crushed by tariffs on assembled vehicles or parts at this level,” Carl Weinberg, chief economist at High Frequency Economics, said in a note to clients 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 U.S. manufacturing base is very positive,” Stellantis, which owns Dodge, Jeep, Ram, Chrysler and other brands, said in a statement.
GM CEO Mary T. Barra congratulated Trump on Monday on the X mark and said the company “looks forward to working together to achieve our shared goal of making strong American automobiles.”
There’s no sign that Elon Musk — Tesla’s CEO and head of what Trump calls the Department of Government Efficiency — is using his influence to stop the assault on electric cars. Tesla accounts for just under half of all electric vehicles sold in the United States, and nearly all of its vehicles qualify for $7,500 in tax credits.
Four of the 16 cars and trucks that can be purchased with the help of this tax break are made by Tesla. General Motors is the only automaker with more eligible models, at five. No other company has more than two qualifying vehicles.
Mr Musk has previously said the government should get rid of all subsidies and that Tesla would suffer less than other automakers. But analysts point out that Tesla’s sales and profits will be severely harmed if Trump succeeds in canceling or cutting the tax credit for electric cars, 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, Mr. Musk, who is also the CEO of SpaceX, rejoiced that the president had promised to send astronauts to Mars. “Can you imagine how cool it would be for astronauts to fly the flag on another planet for the first time?” Mr. Musk said. He did not mention cars.
