The transition team of US President-elect Trump has recommended extensive reforms to cut off policy support for electric vehicles and charging stations. The team also recommended tariffs on all battery materials worldwide. The proposal comes at a time when the US electric vehicle transition has stagnated. In previous campaign activities, Trump promised to relax the management of fossil fuel vehicles and overturn what he called President Biden’s “electric vehicle mandate.” Overall, these recommendations are contrary to the Biden administration’s policy of promoting the transition to electric vehicles.
The team has also previously called for the cancellation of the Biden administration’s $7,500 tax credit for consumers to buy electric vehicles. At present, many traditional automakers are launching more electric models in the US market, and these possible new policies may hit the production and sales of electric vehicles in the United States. This policy shift is not unexpected. When Trump formally accepted the Republican presidential nomination and outlined his policy platform at the Republican National Convention in July, he said that he would end Biden’s electric vehicle policy and revive the domestic auto manufacturing industry. Trump also said that he would strengthen oil and gas drilling in the United States and abandon the Biden administration’s new energy policy.
Why Trump Wants to Overhaul US Electric Vehicle Policy
During his presidential campaign, Trump denounced the tax credit policy, arguing that it was part of a “green new scam” that would destroy the US auto industry. He believes that the US’s rapid shift to electric vehicles will lead to a large influx of electric vehicles manufactured in other countries and push up the purchase price of electric vehicles. His transition team is currently developing plans to abolish the tax credit and revoke the stricter fuel economy regulations promoted by the Biden administration. Trump said that the federal revenue recovered after the tax credit is abolished will be used for infrastructure construction such as roads, bridges and dams.
In addition, the Trump team also proposed imposing tariffs on all battery materials in the world to enhance the competitiveness of the US domestic battery industry and reduce dependence on external resources. However, this move may lead to higher battery costs, which in turn affects the price and market competitiveness of electric vehicles. Trump’s series of policy adjustments reflect his strengthening of the US manufacturing strategy, emphasizing the guarantee of independent and controllable supply chains for key materials and providing a fair market environment for traditional fuel vehicles.
The Impact of Policy Changes
The electric vehicle tax credit policy is an important part of the Biden administration’s Inflation Reduction Act, which aims to encourage consumers to buy electric vehicles through fiscal subsidies and promote the development of the US electric vehicle industry. However, the cancellation of this policy proposed by the Trump team is undoubtedly a major blow to the electric vehicle industry. The cancellation of the electric vehicle tax credit will lead to higher prices for electric vehicles, thereby reducing consumers’ willingness to buy. In the United States, car prices remain high, charging infrastructure is uneven, and the penetration rate of electric vehicles has shown a downward trend. The cancellation of the tax credit will further exacerbate this phenomenon.
Although far from the expectations of automakers, electric vehicle sales in the United States have been on the rise this year. The tax credit policy for purchasing electric vehicles is a key provision of the Biden administration’s “Reducing Inflation Act”. Repealing this provision will undoubtedly push up the purchase price of electric vehicles, hit consumer enthusiasm for purchasing, and ultimately lead to a decline in electric vehicle sales. If electric vehicle sales fall and the growth rate slows, it will force almost all automakers to cut production of electric vehicles and postpone the construction of related supply chains such as battery factories. Because in the smoother process of electrification, these seem no longer necessary.
The tax credit policy is not only for consumers who buy cars, but also includes subsidies for automakers that transform into electric vehicle production. These tax credits will help GM, Ford and Stellaris achieve the transition from fuel vehicles to electric vehicles. These subsidies will also help the Detroit Big Three automakers (GM, Ford and Chrysler) compete with foreign competitors.
Unlike Tesla, Ford and GM are profitable overall, but they are still losing money on electric vehicles. Although both companies believe that the electric vehicle business will be profitable in the next few years as costs decrease and sales increase. Repealing the tax credit will harm the interests of the Detroit Big Three automakers in the long run because they will lose competitiveness in electric vehicle technology leaps compared to global competitors. The development of the electric vehicle industry cannot be separated from the support and encouragement of the government. The cancellation of the tax credit policy will weaken corporate confidence and hinder the development of the industry.
Attitudes from All Sides
California Governor Newsom recently issued a statement that if the Trump administration cancels the federal tax credit, California will intervene and double down on its commitment to clean air and green jobs in California. At the same time, he also asked the California State Assembly to hold a special meeting in December, with the agenda including increasing the litigation fund to sue the Trump administration’s budget.
Currently, the Alliance for Automotive Innovation, a trade group representing most automakers, has written to Trump to express support for this latest tax credit policy, believing that it will help ensure that the United States continues to lead in manufacturing, which is vital to national and economic security. But GM, Ford and Stellaris have not commented on the abolition of the tax credit.
Ultimately, with or without tax credits, the auto industry’s grand plan to transform to electric vehicles will not change. Especially considering the huge investments that have been made, according to the Center for Automotive Research, the US auto industry has invested at least $160 billion in planning, designing and manufacturing electric vehicles since 2021. In addition, the Trump administration is considering canceling some safety regulations on self-driving cars, such as self-driving cars must have human drivers. Relaxing regulations on self-driving cars will promote the development of self-driving technology and may have a significant impact on the self-driving car industry.
