Four reasons Electric vehicle sales will stall under Trump 2.0 — and one big wild card

(Bill Sternberg is a veteran Washington journalist and former editorial page editor of USA Today.)

PORT ST. LUCIE, Fla. (Callaway Climate Insights) — We interrupt the electric vehicle revolution to bring you these important messages from Washington: Donald Trump’s victory in the presidential election will put the brakes on EV adoption in the U.S. And if you are looking for a federal subsidy to buy or lease an EV, you should act sooner rather than later.

To promote sales of plug-ins as part of his climate agenda, President Joe Biden put in place a variety of carrots (tax credits for EV buyers and builders) and sticks (an emissions rule aimed at ensuring that most vehicle sales are EVs by 2032). Now Trump and Republicans in Congress are poised to reverse the incentives and the mandates, ensuring that electric vehicle sales are driven more by the market than by government.

Because of the election results, GlobalData has already reduced its estimate of EV sales in the United States from 33% of the market in 2030 to 28%. Even that might be too high, considering that EVs made up just 6.8% of U.S. new vehicle sales in May, according to Edmunds.

Here are four reasons that EV sales are likely to plateau during the second Trump administration — and one big uncertainty that clouds the outlook:

So long, subsidies

Biden’s signature climate law, the Inflation Reduction Act, provides tax credits of up to $7,500 for certain buyers of certain EVs. Under a separate provision, the credits can also be used to subsidize EV leases, which account for about 80% of plug-in deliveries from franchised dealerships.

The White House and GOP-controlled Congress will be looking for money to offset the costs of extending Trump’s first-term tax cuts, which expire next year, and making good on his expensive promises such as eliminating taxes on tip income. As a result, the EV tax credits are expected to be a prime target for Republicans and their allies in the fossil fuel industry.

Even without a Trump victory, fewer EV models were expected to qualify for the tax credits next year because of tighter domestic-content requirements, and the leasing program relies on annual “safe harbor” extensions from the IRS. By tightening eligibility rules and other administrative actions, the Trump Treasury Department could effectively strangle both programs.

So if you qualify for the existing federal tax credits and are interested in buying or leasing a qualifying EV, should you do it by the end of 2024? “That would be very good advice,” one auto industry veteran told me.

Bye, bye, tailpipe standards

In March, Biden’s Environmental Protection Agency finalized rules that limit automobile tailpipe emissions. The rules are designed to ensure that most (not all) vehicles sold in the United States by 2032 are battery-electric or hybrids. Trump has vowed to end the “electric vehicle mandate” on his first day in office. He can’t do that, but he can set in motion a process for killing the EPA tailpipe rules.

Drill, baby, drill

Nothing drives EV sales like high gasoline prices, and nothing undermines them like low gas prices. It’s no coincidence that California, which has the highest gas prices in the continental U.S., also has the highest EV adoption rate. As part of his anti-inflation agenda, Trump has vowed to unleash so much oil drilling that energy prices will be cut in half within 12 months. That’s highly improbable, but even an extended period of relatively low prices at the pump will curb the appetite for EVs.

The California connection

California has long asserted the right to set its own emission standards. That right, under a Clean Air Act waiver, underpins the state’s goal of selling only zero-emissions vehicles by 2035. Trump is likely to try again to revoke California’s waiver, a step called for in the Project 2025 conservative blueprint for Trump’s second term. The effort might or might not succeed, but the issue is likely to end up before the business-friendly Supreme Court and its 6-3 conservative majority.

The Elon factor

The bromance between Trump and Tesla CEO Elon Musk injects the biggest amount of uncertainty into the forecast for EVs. It’s the reason Tesla stock has soared since the election, while Rivian dropped 8%, Lucid fell 5% and charging companies plunged by double digits on the day the race was called.

The Musk-Trump alliance is also scrambling the politics of EVs. Early in the 2024 campaign, Trump was unrelentingly hostile toward plug-ins, bashing them at every opportunity. After he received Musk’s enthusiastic support and financial backing, Trump began to temper his language about EVs. “I’m totally for them,” he said in Michigan. “I’ve driven them and they are incredible, but they’re not for everybody.” Musk has called Trump “a huge fan” of Tesla’s Cybertruck.

In a Pew Research Survey in June, 45% of Democrats said they would be “very interested” in buying an EV compared to just 13% of Republicans. Now Musk’s all-in embrace of Trump has alienated the upper-income coastal Democrats who were a big part of Tesla’s customer base.

Musk was incensed when the Biden administration snubbed Tesla, which has half the U.S. market for electric vehicles, in favor of Detroit’s unionized automakers. In the second Trump administration the situation could be reversed, with Tesla as the favored child of the White House and the legacy automakers looking in from the outside.

Musk has said his competitors need tax credits more than Tesla does. But softening sales raise the possibility that, in a particularly blatant form of crony capitalism, Musk and Trump could try to retain the federal subsidies in a form that only Tesla vehicles would qualify. “I don’t think there is a way the credits could apply just to Tesla,” the industry veteran says, “but that’s a wild card — what Elon Musk is going to ask Trump to do.”