By and large, the U.S. electric vehicle market operates according to Democratic policies. There is a federal tax credit for car buyers. Battery manufacturing subsidies. Cheap loans to build electric vehicle factories. Charger subsidy. Regulations that force automakers to sell more vehicles with zero tailpipe emissions.
All that aid, worth hundreds of billions of dollars, could disappear soon after President-elect Donald J. Trump takes office, despite his close ties to Elon Musk, the CEO of electric car maker Tesla.
President Trump and Republicans in Congress have said they plan to eliminate most federal support for electric cars and trucks and reverse emissions regulations, raising doubts about the future of these vehicles and the billions of dollars automakers have invested to design and build them. It’s arousing.
Still, many auto experts say market forces and technological advances will ultimately drive a long-term shift toward electric vehicles, no matter how far Republicans go to undo President Biden’s climate agenda.
Battery prices, the most expensive component in electric vehicles, are falling rapidly. Factor in savings in fuel and maintenance costs, and many electric vehicles already cost no more to own than equivalent gasoline models.
Technology is advancing rapidly. Batteries are becoming lighter and smaller, charging faster and traveling longer distances. And according to research firm Rho Motion, more than 12,000 high-voltage public chargers will be added in the U.S. in 2024, a 33% increase over the previous year.
Automakers have a big financial interest in promoting electric vehicles, regardless of who’s in the White House. They need to get a return on the investment they have made in their production facilities. And failure to keep up with technology could leave it vulnerable to emerging competitors from China going all-in on electric vehicles.
Randy Parker, CEO of Hyundai Motor America, told reporters in a conference call last week, “No matter what policy changes the new administration puts forward, we will comply with them and adjust accordingly.”
“Make no mistake,” he added. “We are committed to electrification.”
Hyundai recently began producing its popular Ioniq 5 car at a new $7.6 billion plant near Savannah, Georgia. The car and the large electric sport utility vehicle will be the first Korean automakers to receive a $7,500 federal tax credit. The factory complex, which will employ 8,500 people, including Hyundai partners, when it reaches full capacity, is one of the largest examples of the jobs and investment created by electric vehicles.
There is little doubt that sales of battery-powered cars, which typically cost more up front than comparable gasoline-powered cars, will take a hit if Republicans repeal the Inflation Reduction Act, which includes $7,500 credits and subsidies for battery manufacturing, charger installation and electricity. There is no room for doubt. School bus.
Rep. Mike Johnson, a Republican from Louisiana, a large oil and gas producer, repeated the threat after being re-elected House speaker this month. “We will save jobs at automakers, and we will do so by ending outrageous EV mandates,” he said.
Analysts note that sales of electric vehicles in Germany plunged 27% last year after the German government cut incentives for car buyers.
“If incentives go away, it will definitely impact sales,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive.
According to Cox, in 2024, electric cars sold for an average of $55,105 in the U.S. compared to $48,165 for gasoline-powered cars.
However, the price gap is half of what it was two years ago. More affordable models are expected to be released this year, and many analysts predict that electric cars will cost the same or less than internal combustion engine cars by the end of 2010.
General Motors sells the Chevrolet Equinox electric vehicle for about $35,000 and plans to revive the Chevrolet Bolt this year at a lower price. Later this year, Honda plans to begin producing electric vehicles in Ohio. The Japanese company has not announced prices, but is known for its affordable vehicles.
Tesla has said it will begin selling cheaper vehicles by the middle of this year, but has released few details. Later this year, Volvo plans to start selling a version of the EX30, expected to cost less than $37,000.
“We will be able to lower the price of EVs compared to internal combustion engine vehicles,” said Kurt Kelty, GM’s vice president of batteries. “That’s what we’re aiming for.”
Many states, including Colorado, New York, and Washington, offer subsidies for electric vehicles that remain intact. California Gov. Gavin Newsom said the state would reinstate the incentive once the federal tax credit is repealed.
In China, sales of electric cars have soared as prices have fallen to levels that are equal to or lower than gasoline-powered cars, foreshadowing what will eventually happen in the United States. Half of new cars sold in China are electric or plug-in hybrids, compared to about 10% in the United States.
With price no longer a barrier, Chinese car buyers focused on the advantages of electric vehicles, including software features that would be difficult to install in gasoline-powered cars, said Hagen Heubach, who heads the automotive business at German software company SAP. “Markets can turn very quickly,” he said.
The success and global expansion of Chinese automakers is also putting pressure on U.S. and European automakers to continue developing their technology or risk being surpassed.
BYD, headquartered in Shenzhen, China, joined the big leagues of the global automobile industry by producing 4.3 million electric and plug-in hybrid vehicles last year. BYD does not make cars that run solely on fossil fuels.
Most auto industry executives believe electric vehicles will eventually dominate, but they differ on when that will happen. According to Cox, sales of electric vehicles in the U.S. increased 8% last year, while sales of vehicles that run solely on fossil fuels fell 2%.
Sales of plug-in hybrids, which can travel about 40 miles on battery power before the gasoline engine kicks in, surged 19%. This means many consumers are interested in driving electric, even if they aren’t ready to ditch gasoline.
In any case, only a small number of cars qualify for federal tax deductions for buyers. The Inflation Reduction Act limited tax credit eligibility to vehicles with a certain percentage of parts made in the United States or its trading allies. Requirements become more stringent every year and some vehicles are removed from the list. From January 1, some models such as Volkswagen ID.4 and Ford Mustang Mach-E will no longer be eligible.
Republicans are also expected to target a provision that would allow rental companies to collect a $7,500 credit on all battery-powered cars, regardless of where they are manufactured. Rental companies typically pass on the savings to their customers.
Eliminating the credit would reduce electric car sales by more than 300,000 units per year, according to a study published last October by Stanford University professors. This corresponds to sales for approximately three months in 2024. University of Chicago; University of California, Berkeley; and Duke University.
But the researchers also noted that many buyers would have purchased electric vehicles even without incentives. Because battery-powered cars offer quick and quiet acceleration, some drivers appear willing to pay more for them. You can charge at home at a cheaper cost than charging at a gas station. No oil changes or other routine maintenance required.
Of course, many car buyers may be reluctant to purchase a car for several years.
Nearly half of Americans recently surveyed by consulting firm Deloitte are concerned that electric vehicles cannot travel enough distance between charges. However, research shows that most people rarely travel more than 60 miles from home, and most electric models can comfortably travel 200 to 300 miles without stopping.
It’s no surprise that Republicans would repeal all Democratic electric vehicle policies. That’s because many Republicans supported new plants in states like Tennessee, Kentucky, and South Carolina. Republicans will kill jobs in their strongholds.
Mr. Trump’s inner circle includes Mr. Musk, whose electric car company Tesla accounts for nearly half of the electric vehicles sold in the United States and would benefit from the credits. Mr. Musk has supported eliminating subsidies for electric vehicles, but it is unclear how he will use his influence if Mr. Trump becomes president. Tesla did not respond to a request for comment.
Caroline Leavitt, a spokeswoman for President-elect Trump, said in an email that Trump’s campaign promises included “stopping attacks on gasoline-powered automobiles.” She suggested he take a more balanced approach. “President Trump will support the auto industry and allow space for both gasoline and electric vehicles,” she said.
Still, electric vehicle advocates are worried about the chaos ahead. Albert Gore III, executive director of the Zero Emission Transportation Association and the son of a former Democratic vice president, said weak sales could undermine efforts to develop lithium and other battery materials in the United States. China now dominates the supply chain.
Mining companies “have been able to raise funds in the capital markets and invest in U.S. production capacity based on firm demand commitments from U.S. automakers,” Mr. Gore said. “That’s probably the most obvious impact.”
Environmentalists say even a slight slowdown in electric vehicle sales could seriously undermine efforts to reduce greenhouse gas emissions from burning fossil fuels.
“We’re probably not moving fast enough right now,” said John Boesel, president of Calstart, a nonprofit group backed by businesses and governments that promotes clean transportation. “So any efforts to delay or delay things will have a negative impact for decades, if not centuries, to come.”
