Trump's aim is squarely set on electric vehicles. Despite his power limitations, he's making waves in the automotive sector.
Trump declared an end to the "electric vehicle mandate" in his executive order, but it's important to clarify that there's never been a federal law blocking Americans from owning gas-powered vehicles. The order's validity and execution are unclear, with potential congressional action, court battles, and industry persistence on EVs being likely factors.
The executive order aims to eliminate certain federal incentives for EVs, such as the $7,500 tax credit, funding for charging stations, and low-interest loans for traditional automakers building EVs and battery plants. However, modifications to this federal support might necessitate congressional action, as parts of it stem from the 2022 law.
Trump also wishes to change local regulations in nine states that plan to ban gasoline-powered vehicle sales by 2035, including California. Trump attempted to limit these regulations during his first term, resulting in legal battles. Now, a new legal battle may occur, potentially taking years to settle.
The order intends to scale back EPA emission rules, pushing automakers to sell more zero-emission vehicles. However, alterations to these standards would require a rule-setting process, and supporters of the current measures might struggle to challenge changes made during Trump's administration.
While Trump may encourage the boost of petroleum-powered cars and the oil industry, the auto industry is resistant. Major automakers generally share concerns about state mandates, although they are committed to EVs. The tax credit and other federal support for EVs enjoy broad industry support. The Alliance for Automotive Innovation, for example, pushes to maintain the tax credit and other support, arguing that US automakers need help competing with Chinese manufacturers.
EV sales in the US are growing, although gasoline-powered cars still account for the majority of sales. Chinese manufacturers lead in EV production, with nearly one-third of vehicles sold there being electric. Despite losing money on EVs right now, legacy automakers forecast profits once sales increase. Moreover, the car market is a long-term endeavor, with dozens of EV models in the pipeline to meet growing demand.
Tesla's profit margin tends to be over twice that of traditional automakers. However, EV subsidies could benefit Tesla's competitors. Tesla sales dropped in 2022 due to increased competition from legacy US and Chinese automakers. Analysts argue that ending federal support for EVs will benefit Tesla by narrowing the competitive field.
The executive order negatively impacts businesses in the electric vehicle sector, as it aims to eliminate federal incentives like the tax credit. Similarly, changes in local regulations seeking to ban gasoline-powered vehicle sales could impact businesses that rely on gasoline-powered vehicles.
