Trump hits brakes on electric vehicle growth, for now

Reuters

28-07-2025

July 28 - President Trump's One Big Beautiful Bill ends $7,500 tax credits for new electric vehicle purchases on September 30, along with $4,000 for used models, seven years earlier than planned by the Biden administration.
Electric vehicle battery production tax credits (PTCs) will end in 2028, four years early, while tighter emissions regulations have been scrapped. However, a $250 road repair charge included in the original bill was dropped by the Senate.
This followed Trump's January decision to revoke the Biden administration's mandate for electric vehicles to comprise at least 50% of all new vehicle sales by 2030. The federal government also instructed state officials to halt charging infrastructure expenditure via the $5 billion National Electric Vehicle Infrastructure (NEVI) program.
On June 12, Trump also blocked California's electric vehicle sales mandates following lobbying by some automotive manufacturers, including GM and Toyota. The mandates banned the sale of new internal combustion engine (ICE)-only vehicles from 2035 and required that at least 80% of all new vehicle sales be battery electric by then.
California Governor Gavin Newsom has said he will legally challenge Trump's repeals. Eleven other states had based their own plans to incentivize electric vehicle adoption on California's policies.
Other legal challenges to Trump administration efforts to cut electric vehicle incentives have already had an effect. On June 24, a federal judge issued a preliminary injunction ordering the release of NEVI funding for 14 states led by Democratic governors, although the long-term fate of that financing remains uncertain due to ongoing legal wrangling.
NEVI has accelerated the buildout of electric vehicle charging infrastructure, 'particularly by enabling greater density along highway corridors,' said Robert Barrosa, the CEO of Electrify America, which runs a network of around 1,000 electric vehicle charging stations in the United States.
Short-term pain
Thanks in large part to federal and state subsidies, the electric vehicle market, which consists of battery electric and plug-in hybrid electric vehicles, has seen rapid growth in recent years.
Electric vehicle market share increased from 2% of new light-duty vehicle sales in 2020 to 10% in 2024, and the number of models in the U.S. grew from under 20 in 2012 to nearly 130 in 2024, according to data from the International Council on Clean Transportation (ICCT).
CHART: Annual US electric vehicle sales, number of available models
But Trump's anti-electric vehicle drive will likely slow down the market. After the passing of the One Big Beautiful Bill and introduction of new import tariffs, Rystad forecast that sales of new electric vehicles will account for just 18.75% of the market by 2030, whereas in January it forecast a 24% market share.
Despite uncertainty over their implementation, new U.S. import tariffs are likely to increase the average cost of vehicles by between $2,000 and $4,000, roughly the same for gas vehicles and electric models, said Tom Coley, Analyst, Battery Research, Rystad Energy.
Trump imposed a 25% tariff on all imported passenger vehicles from April 3 but on July 27 the U.S. and European Union (EU) agreed a trade deal that sets a 15% baseline tariff on imports from the EU, including vehicles. Blanket tariffs on many other countries remain in flux and the Trump administration confirmed a 50% tariff on steel and aluminium imports on June 4.
Trump's culling of tax credits will make it harder for people on lower incomes to afford electric vehicles, shrinking the market, David Reichmuth, Senior Scientist, Clean Transportation Program at the Union of Concerned Scientists, told Reuters Events.
However, many drivers will still choose electric because they offer lower fuel and maintenance costs, while carmakers are unlikely to exit electrification efforts because they operate in a global marketplace and 'have already poured money into [electric vehicle] manufacturing,' he noted.
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Ford has committed to invest $50 billion in electric vehicles and battery development through 2026 and General Motors (GM) has pledged $35 billion of investments through 2025. Foreign carmakers including BMW, Volvo, Volkswagen and Mercedes Benz already produce or assemble electric vehicles in the U.S., while Hyundai in March opened a $7.6 billion "Metaplant' in Georgia to manufacture electric vehicles.
U.S. legacy automakers will be forced to shift their focus away from profitable gas models in the longer term because Asian and European electric vehicles will become 'increasingly competitive in the U.S. market and threaten the ability of the U.S. auto industry to compete globally,' Dan Bowermaster, Senior Program Manager, Electric Transportation at the Electric Power Research Institute (EPRI), told Reuters Events.
From 2019 to 2024, the rate of charging infrastructure deployment grew about 25% annually, reaching 204,000 non-home chargers deployed across the U.S. by the end of 2024, as per ICCT data.
Electrify America recorded 16 million charging sessions in 2024, a 50% annual rise, and is expanding its network by 30% this year.
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Charging infrastructure providers who relied on federal incentives are likely to see slower growth, Barrosa told Reuters Events, adding that charging networks that are being built by automakers may be 'less impacted.'
Barrosa said that despite some 'noise and volatility' in the short term, the long-term electric vehicle outlook remains 'strong and resilient, bolstered by strong investments and sustained consumer adoption' because of a global shift that 'transcends short-term market fluctuations, political cycles, and economic headwinds.'
Impact on power
Trump's policies are likely to slow growth in power demand from electric vehicles over the next few years, especially in areas that see slow adoption. While hyperscale data centers are currently driving up energy demand, by 2050, power demand growth from transportation is expected to surpass all other sectors and should therefore be prioritized in grid upgrades, said Bowermaster.
CHART: US electricity demand outlook
EPRI data shows strong power demand from electric vehicles in major conurbations, including Los Angeles, San Francisco, Seattle, Dallas, Chicago and along a long strip of the northeast, including Washington and New York. Demand is much lower in rural areas, particularly in low population density areas of the west.
Electric vehicle power demand generally aligns with adoption rates. New electric vehicle market share in the first four months of 2025 was heavily concentrated in California and Colorado. The highest rate was 35.9% in Santa Clara, California, while in most of North Dakota, South Dakota, Nebraska and Kansas electric vehicles accounted for under 1% of new vehicle sales.
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California is a leading state in electric vehicle adoption, with 2.2 million vehicles on its roads, approximately 180,000 public and shared chargers and an estimated 700,000 chargers in private homes. According to a 2024 CEC report, California would need 1.01 million public and shared chargers to support 7.1 million light-duty electric vehicles by 2030.
Growing electric vehicle power demand has forced California grid operator CAISO and the California Energy Commission (CEC) to build vehicle demand into their capacity plans, a CAISO spokesperson told Reuters Events.
California and the northeast will likely maintain momentum in electric vehicle adoption, while the Midwest and Southeast 'may deprioritize [electric vehicle] infrastructure or rollback [electric vehicle] fleet mandates' because their economies rely heavily on ICE supply chains, Coley told Reuters Events. The Sunbelt and Texas may diverge between strong corporate fleet demand and weaker individual adoption, he added.