On day one of his second term, President Donald Trump issued an executive order aimed at undoing the EV mandate for electric vehicle promotion. It’s not clear how expansive the impact will be or if it will kill the $7,500 EV tax credit. Trump’s order references government-imposed market distortions that favor EVs.
Legal Battles Might Be Ahead
Policies that promote the sale of electric vehicles might be more difficult to tear out of the tax code than what Trump’s executive order implies. There are also questions on whether the president has sweeping ability to undo legislation related to EVs, which may mean that legal battles are ahead.
According to Kelley Blue Book, some of the orders may face court challenges, while others may require officials to conduct reviews. In general, the president can’t change laws already on the books. However, agencies are likely to change the policies that Trump has instructed them to change. It will still be a slow process and nothing is likely to happen until leaders are in place.
Trump specifically revoked a 2021 executive order from Biden. That nonbinding directive included the goal of half of all new passenger vehicles sold in 20230 being zero-emission vehicles.
Automakers Enjoy a Reprieve
Although EV sales continue to grow, the rate of EV adoption is slower than expected. With the new administration, automakers are likely to get a break in trying to electrify. Trump’s orders appear to be targeting electric vehicles, money for charging stations, and the emissions rules put in place by California.
According to a professor at the University of Michigan’s Ross School of Business following the auto industry, Biden’s order indicated EV aspirations, but Trump’s revocation signals the reality of EVs. Many automakers have already adjusted to a more realistic strategy for EV adoption. Lagging sales became one reprieve, and now they have another one from the government.
Companies simply can’t sell what people won’t buy in a market economy, whether the government wants it or not. Some experts believe that easing regulations will give the industry the ability to make better decisions.
Automakers React
In general, the reaction from automakers is positive. They can now strategize a foundation for EVs without being forced by the government to dump money into something with slow sales. Some experts also believe that Trump will phase out the EV tax credit this year. The EV incentives and the 2030 target will likely be upended by Trump’s order.
On the other hand, hybrid vehicles are expected to become front and center for many automakers. The threat of tariffs on Canada and Mexico also looms as a problem for automakers who have plants in both countries. Automakers are unsurprisingly more worried about these than the revocation of the EV mandates.
In fact, no automaker is fully safe from tariffs if they’re implemented. Many parts are made across the border and sent to American plants where the vehicle is assembled. A tariff on each part crossing the border could add at least a few thousand dollars in costs.
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