Donald Trump hit the ground running upon becoming the 47th US president signing a flurry of executive orders to change course from the Biden administration’s policies. Some have already had an immediate impact like those on immigration policy, others have already been challenged in the courts.
Among the wide ranging issues the plethora of executive orders cover was eliminating what he calls the “electric vehicle (EV) mandate” in order to “promote true consumer choice.” The action would consider “the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies.”
While there are no specific targets mentioned, it is likely that he is seeking to repeal the $7,500 EV tax credit. Additionally, the broad order, entitled “Unleashing American Energy,” would likely seek to end other Biden-era legislation to move the nation toward zero-emissions and that strengthened air quality protection rules, including those imposed by states.
An immediate pause in the disbursement of funding to develop a network of vehicle-charging stations across the nation is specifically mentioned in the executive order. However, other incentives that were part of the “Green New Deal” legislation passed in Congress could also see the funding tap dry up. Some of these could include financial incentives like those for companies to build new manufacturing facilities for EVs and the batteries that power them.
Goodbye to the $7,500 EV tax credit?
Eliminating the $7,500 tax incentive to make electric vehicles more affordable for consumers may require the support of Congress as it was part of the Inflation Reduction Act passed in 2022. However, the Internal Revenue Service wrote the details of the credit.
A move to get rid of the $7,500 EV credit would likely face pushback from major automakers who broadly support it and other financial incentives for EVs. The Alliance for Automotive Innovation has argued that these are needed to help US automakers compete with China whose EV manufacturers produce the most in the world.
Furthermore, CNN reports that legacy automakers have already invested $33 billion into factories dedicated solely to the production of EVs. And on top of that another $90 billion in domestic battery factories which are mainly located in southern states, areas that voted heavily for Trump.
However, the head of one car company has been vocal about getting rid of EV subsidies, Tesla’s Elon Musk. The reason? It is helping to create more competition as consumers have more EV options on the car lot.
Garrett Nelson, an analyst for CFRA Research, wrote in a note to clients that without the $7,500 EV credit “Tesla’s competitive moat” would get wider. Even though Tesla buyers can take advantage of the credit, it would make “competing EV models even more uneconomic.” Currently, Tesla is the only profitable manufacturer of EVs, getting a 16% profit margin during the first three quarters of 2024, almost twice that of General Motors.
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