The incoming Trump Administration’s positions on incentives and tariffs could slow EV adoption in the United States, but there are alternative possibilities.
The sustainability community has been in a state of worry since the election of Donald Trump, as many of the policy positions he proposed during the election were not aligned with a climate agenda. President-elect Trump has committed to removing the United States out of the Paris accords (again) and removing regulations on oil and gas extraction to increase domestic production.
Just this week, President-elect Trump announced his intentions to slap tariffs on imports from China, Canada and Mexico. While time will tell if these tariffs come to fruition, they undoubtedly would have some negative impacts on sustainability in general. Such protections increase the costs for technology and inhibit flow of technological advances. For example, tariffs on imports like solar panels, wind turbines, or electric vehicle components can slow advancement in the nation imposing the tariff or reverse sustainable adoption altogether. Additionally, tariffs can lead to inefficiencies by encouraging local production that might not yet be environmentally optimized, increasing emissions associated with production and logistics. Finally counter-tariffs from impacted countries could reduce U.S. exports of sustainable goods and reduce global collaboration on climate-friendly initiatives.
But as it relates to EVs, upon further review, the Biden administration had already effectively prohibited EVs from China to be sold in the United States with its 100% tariff. Additionally, the Biden Administration placed large tariffs on EV batteries and proposed rules to ban Chinese hardware and software in connected vehicles. So not only is there limited daylight between the Biden Administration and President-elect Trump’s position, but also Trump has signaled a willingness to allow Chinese-owned companies to build batteries in the United States, telling Reuters on the campaign trail, “We’re going to give incentives, and if China and other countries want to come here and sell the cars, they’re going to build plants here, and they’re going to hire our workers.”
It is important to note that the Trump campaign took a hard stance against EV mandates and incentives during the 2024 Presidential election and has promised to redo, if not eliminate, the $7500 tax credit for EV purchases implemented by President Biden. Using government policy to promote or mandate EV adoption over internal combustion engine vehicles is the antithesis of what President Trump campaigned on; however, will his policies stop the growth in EV adoption in the United States?
Chinese EVs, on average, have production costs $10,000 to $15,000 less than American-made EVs. Chinese batteries are up to $50 per kWh cheaper than their US counterparts (a typical battery for a car can be up to 100 kWh and 200 kWh for an SUV). So, the cost of the battery is one key driver in the cost-competitiveness of Chinese EVs. CATL, the Chinese battery-making giant, has shown interest in building battery-making capacity in the United States. President-elect Trump’s signaling could result in the availability of cheaper batteries and more economical battery-making technology. It stands to reason that this could have an impact that outweighs those at-risk incentives, especially when considering higher-income purchasers or fleet customers.
EV sales in the United States hit one million units in 2023, and in the third quarter of 2024, EV sales hit an all-time high of 8.9% of market share which was higher than the 7.8% of market share from the third quarter of 2023. Cox Automotive, a reputable automotive industry research firm, is bullish on EVs for the second half of this decade. In its report earlier this year, they predicted that the number of “EV considerers”, or percent of vehicle purchasers who would consider purchasing an EV, would go from 45% of the market to 79% of the market by 2028. Moreover, this number will grow to 87% of the market by 2032. The reasons cited include demographic shifts, battery technology improvement, charging infrastructure improvement and growing consumer dedication to sustainability. Cox Automotive did not draw a direct dependency on federal mandates or incentive policies for this growth.
So, while there is consternation in the sustainability community on how a Donald Trump administration would impact EV adoption, only time will tell what will truly happen. But the sustained momentum around EVs in the United States ‒ not to mention the momentum and mandates in other parts of the world (like the EU) and the technological advancements and increases in capacity in China ‒ should give sustainability advocates some comfort.
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