Trump’s Order to End E.V. Subsidies Draws Pushback and Doubt
Automakers and even some Republicans may
fight to preserve funds, and environmental activists will likely sue, but some experts
said that some changes may not survive legal challenges.
·
The Department of Energy has agreed to
lend billions to carmakers like Rivian, which will receive
$6 billion for a factory near Atlanta to produce electric sport utility vehicles.
The loan agreements, some finalized in the waning days of the Biden administration,
are binding contracts.
·
There is no sign that Elon Musk — the chief
executive of Tesla and head of what Mr. Trump is calling the Department of Government
Efficiency — is using his influence to blunt the attack on electric vehicles. Tesla
accounts for slightly less than half the electric cars sold in the United States,
and almost all its vehicles qualify for $7,500 tax credits.
[ABS
News Service/22.01.2025]
If President Trump has his way, the auto
industry’s transition to electric vehicles will soon slam into reverse. He will
erase tax credits for electric-vehicle purchases, federal grants for chargers, and
subsidies and loans to help retool assembly lines and build battery factories.
Executive orders issued by Mr. Trump on
Inauguration Day amount to a sweeping repudiation of a centerpiece
of former President Joseph R. Biden Jr.’s multibillion-dollar program to address
climate change, which Republicans cast as a campaign to ban gasoline cars.
The orders also present a challenge to
automakers that have invested billions of dollars in electric vehicles, in part
because the Biden administration encouraged them to. But some of the orders appear
to bypass Congress or federal rule-making procedures, which could make them vulnerable
to lawsuits and even resistance from within the Republican Party.
While framed as a way to revive the American
auto industry, the orders could cause U.S. carmakers to fall behind if they scale
back their electric-vehicle programs while Asian and European automakers continue
perfecting the technology, analysts say. Already, 50 percent of car sales in China
are electric or plug-in hybrids, and Chinese automakers like BYD are selling more
cars around the world, taking customers away from established car companies, including
American manufacturers.
An executive order entitled “Unleashing
American Energy” and signed by the president on Monday instructs federal agencies
to immediately pause disbursement of funds allocated by Congress that were part
of the Biden effort to push the auto industry toward vehicles with no tailpipe emissions.
Among other things, the funds helped states to install fast chargers along major
highways.
Mr. Biden’s main climate law, the Inflation
Reduction Act, also provided tax credits of up to $7,500 for buyers of new electric
vehicles and $4,000 to buyers of used models. The credits effectively made the cost
of buying some electric cars roughly on par with prices for cars with gasoline or
diesel engines.
Mr. Trump also rescinded an aspirational
Biden executive order that called for 50 percent of new vehicles sold in 2030 to
be fully electric, plug-in hybrids or vehicles that run on hydrogen fuel cells.
And Mr. Trump said the administration would
seek to revoke California’s authority to establish air-quality standards that are
stricter than federal rules. That would have a broad effect. California is aiming
for 100 percent of new-car sales to be electric by 2035, and some of its standards
are copied by at least 17 other states.
“The impact of this will be significant,”
said Shay Natarajan, a partner at Mobility Impact Partners, a private equity firm
that invests in sustainable transportation.
If demand for electric vehicles flags,
as it has in other countries like Germany that cut incentives, she noted, carmakers
could be left with costly, underused electric-vehicle and battery factories.
“Federal funding for E.V. and battery manufacturing
will be harder to access, increasing the risk of stranded capital for manufacturing
projects already underway,” Ms. Natarajan said in an email.
Representatives of the fossil-fuel industry
celebrated the president’s action, while environmentalists lamented what they said
was a serious setback to efforts to cut greenhouse gas emissions and reduce urban
air pollution caused by cars.
“This is a new day for American energy,”
Mike Sommers, the president of the American Petroleum Institute, said in a statement,
“and we applaud President Trump for moving swiftly to chart a new path where U.S.
oil and natural gas are embraced, not restricted.”
Katherine García, a transportation expert
at the Sierra Club, said: “Rolling back vehicle emission safeguards harms our health,
our wallets and our climate. We will fight him at every turn of the road.”
But the end effect may not be as broad
as the forceful language in Mr. Trump’s executive orders suggests.
Funds to encourage electric-vehicle sales
and manufacturing were enshrined in legislation that the president cannot unilaterally
repeal. Mr. Trump also cannot revoke rules that the Treasury Department and other
government agencies established to determine how the money would be handed out merely
with a stroke of the pen. Any attempt to short-circuit the laborious process of
proposing new regulations that includes seeking comments from the public will almost
surely invite credible legal challenges.
The Department of Energy has agreed to
lend billions to carmakers like Rivian, which will receive
$6 billion for a factory near Atlanta to produce electric sport utility vehicles.
The loan agreements, some finalized in the waning days of the Biden administration,
are binding contracts.
Much of the money has flowed to congressional
districts in states like Georgia, Ohio, South Carolina and Tennessee where Republicans
dominate local politics. Their representatives may hesitate to repeal laws that
have brought their districts jobs and investment. That is a challenge for Republican
leaders wrangling slim majorities in the House and Senate.
Ultimately, individuals and families will
decide what cars they buy. Electric vehicles and plug-in hybrids are gaining market
share not only because of subsidies, but also because they offer rapid acceleration
and lower fuel costs. Cars that run on fossil fuels have been losing share, though
that could change if financial incentives are removed from battery-powered cars
and trucks.
The abrupt shift in political direction
presents a quandary for automakers. Some may welcome promises by the president to
rescind emissions and air-quality standards that force manufacturers to sell more
electric cars than they might like. But elimination of federal subsidies could upset
their financial planning when most are struggling to earn or increase profits.
The about-face on electric-vehicle policies
adds to a climate of uncertainty and peril heightened by the president’s promise
to impose 25 percent tariffs on goods from Canada and Mexico, which are major suppliers
of cars and car parts to the United States.
The U.S. auto industry “will be shattered
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 carmakers seemed to applaud the president’s
actions, while others were noncommittal.
“President Trump’s clear focus on policies
that support a robust and competitive manufacturing base in the United States is
hugely positive,” Stellantis, which owns Dodge, Jeep,
Ram, Chrysler and other brands, said in a statement.
Mary T. Barra, the chief executive of General
Motors, congratulated Mr. Trump on Monday on X and said that the company “looks
forward to working together on our shared goal of a strong U.S. automotive industry.”
There is no sign that Elon Musk — the chief
executive of Tesla and head of what Mr. Trump is calling the Department of Government
Efficiency — is using his influence to blunt the attack on electric vehicles. Tesla
accounts for slightly less than half the electric cars sold in the United States,
and almost all its vehicles qualify for $7,500 tax credits.
Four of the 16 cars and trucks that can
be purchased with the help of that tax break are made by Tesla. G.M. is the only
automaker that has more eligible models, at five. No other company has more than
two qualifying vehicles.
Mr. Musk has previously said that the government
should get rid of all subsidies and that Tesla would suffer less than other automakers.
But analysts note that Tesla’s sales and profits would be hit hard if Mr. Trump
successfully repealed or truncated the electric-vehicle tax credit, California’s
clean-air waiver and other such 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 chief executive of SpaceX, exulted
that the president had promised to send astronauts to Mars. “Can you imagine how
awesome it will be to have astronauts plant the flag on another planet for the first
time?” Mr. Musk said. He did not mention cars.