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 and 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 Trump also rescinded an aspirational Biden executive order that called for 50 percent of new vehicles sold in 2030 to be fully electric, plug-in hybrids and vehicles that run on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 Treasury and other government departments 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. In addition to subsidies, electric vehicles and plug-in hybrids are gaining market share because the vehicles 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 exacerbated 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 X Monday and said that the company “looks forward to working together on our shared goal of a strong U.S. automotive industry.”
There was no sign that Elon Musk, the chief executive of Tesla and head of Mr. Trump’s newly formed 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. Every other company has no 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 repeals or truncates 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.
#Trumps #Executive #Order #E.V #Subsidies #Draws #Pushback
