Trump’s executive order to end EV subsidies backfires

If President Trump has his way, the auto industry’s transition to electric vehicles will soon reverse. It would eliminate tax credits for electric vehicle purchases, federal subsidies for chargers, and grants and loans to help build assembly lines and build battery factories.

The executive order issued by Mr. Trump on Inauguration Day amounts to a wholesale repudiation of the centerpiece of former President Joseph R. Biden Jr.’s multibillion-dollar climate change program. day, which the Republicans did as a campaign to ban gasoline cars.

The order also presents a challenge to automakers that have invested billions of dollars in electric vehicles, in part because the Biden administration encouraged them. But some of the orders appear to bypass congressional or federal guidelines, which could make them vulnerable to lawsuits and even opposition from the Republican Party.

Although intended as a way to revive the U.S. auto industry, the order could cause U.S. automakers to collapse if they scrap their electric vehicle programs while continuing to improve the technology. Asian and European automakers, 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 worldwide, taking customers away from the company’s established vehicles, including American manufacturers.

The executive order titled “Releasing American Energy” and signed by the president on Monday instructed the federal agencies to immediately stop the payment of funds proposed by the Congress that were part of the efforts of Biden. to push the automotive industry towards vehicles with no tailpipe emissions. Among other things, the money helped the state install fast chargers on major highways.

Mr. Biden’s key climate legislation, the Inflation Reduction Act, would have taxed buyers of new electric cars up to $7,500 and $4,000 for buyers of used models. The credit made the purchase price of some electric cars the same as the price of a car with a gasoline or diesel engine.

Mr. Trump also rescinded Biden’s executive order that required 50 percent of new cars sold by 2030 to be fully electric, plug-in hybrids or hydrogen fuel cell vehicles.

And Mr. Trump said the administration would seek to revoke California’s authority to set air quality standards that are stricter than federal regulations. This can have serious consequences. California aims for 100 percent of new car sales to be electric by 2035, and some of the standards are being adopted by at least 17 other states.

“The impact 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 cuts incentives, as in other countries such as Germany, he noted, it could be left with expensive and underutilized car manufacturers and batteries.

“Federal funding for EV and battery manufacturing will be more difficult to access, increasing the risk of stranded capital for manufacturing projects already underway,” Ms. Natarajan by email.

Oil industry representatives hailed the president’s move, while environmentalists lamented what they say is a major setback in efforts to reduce greenhouse gas emissions and curb air pollution. – cities created by cars.

“It’s a new day for American energy,” said Mike Sommers, president of the American Petroleum Institute, in a statement, “and we applaud President Trump for moving quickly to chart a new path that is shared by US oil and natural gas, unlimited.

Sierra Club transportation expert Katherine García says, “Car emissions are bad for our health, our wallets, and the climate. We will fight him at every turn”.

But the end result may not be as sweeping as the strong language in Mr. Trump’s executive order suggests.

Funding to encourage the sale and production of electric vehicles is contained in a law that the president cannot withdraw on his own. Mr. Trump also cannot override the rules established by the Treasury Department and other government agencies to determine how the money will be distributed along the line. Any attempt to circumvent the arduous process of proposing new regulations that includes seeking public comment is certain to lead to a credible legal challenge.

The Department of Energy has agreed to lend billions of dollars to automakers like Rivian, which will get $6 billion for a plant near Atlanta to produce buses. The loan agreements, some made during the days of the Biden administration, are binding agreements.

Most of the money flowed to congressional districts in states like Georgia, Ohio, South Carolina and Tennessee where local politics are dominated by Republicans. Their representatives may be reluctant to repeal laws that have created jobs and investment in their districts. It’s a challenge for Republican leaders who are fighting for majorities in both the House and Senate.

In the end, it’s up to the individual and the family to decide which car to buy. Electric cars and plug-in hybrids are gaining market share not only because of financing, but also because they offer fast acceleration and low fuel costs. Fossil fuel vehicles are losing share, although this could change if financial incentives for battery-powered cars and trucks are removed.

The sudden change in political direction creates problems for car manufacturers. Some may welcome the president’s promise to eliminate emissions and air quality standards that force manufacturers to sell more electric cars than they want. But eliminating federal funding could disrupt their financial plans as many struggle to make ends meet or increase profits.

Adding to the uncertainty and risk is the president’s promise to impose 25 percent tariffs on goods from Canada and Mexico, which are suppliers of cars and auto parts to the United States. electric vehicle policy.

The U.S. auto industry “will be crushed by auto or parts wages at this level,” said Carl Weinberg, chief economist at High Frequency Economics, in a note to the customer on Tuesday.

Some of the automakers seemed to applaud the president’s move, while others disagreed.

“President Trump’s clear focus on policies that support a strong and competitive manufacturing base in the United States is excellent,” said Stellantis, owner of Dodge, Jeep, Ram, Chrysler and other brands.

Mary T. Barra, CEO of General Motors, congratulated Trump on Monday at the X and said the company “looks forward to working together on our shared goals in the auto industry America is strong.”

There is no indication that Elon Musk – Tesla’s chief executive and Mr. Trump’s Department of Government Success – is using its power to stop the attack on electric cars. Tesla accounts for less than half of all electric cars sold in the United States, and almost all of its cars qualify for a $7,500 tax.

Four of the 16 cars and trucks that can be purchased with the help of this discount are made by Tesla. GM is the only automaker with a better model, out of five. No other company has more than two qualifying vehicles.

mr. Musk has previously said that the government should withdraw all subsidies and that Tesla will suffer more than other automakers. But analysts have pointed out that Tesla’s sales and profits will be hit hard if Mr Trump successfully removes or cuts the tax credit on electric vehicles, leaving California clean air. 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, was happy that the president promised to send astronauts to Mars. “Can you imagine how amazing it would be if an astronaut planted a flag on another planet for the first time?” Mr. Musk said. He did not mention a car.