Trump's EV Roadblock

Unless you’ve been living under a rock for the past few weeks, you’ll know that Donald Trump will take office as the President of the United States for a second term in 2025. Trump and his team have been vocal about their skepticism toward climate change narratives supported by leading scientists and experts worldwide. This is in stark contrast to the Biden administration, which had championed significant climate action during its tenure.

With Trump’s return, the future of electric vehicles (EVs) is under scrutiny. One of the administration’s rumored plans is to eliminate the $7,500 EV tax credit introduced by Biden. The proposal has already sent shockwaves through the industry. Let’s explore the potential winners and losers of this high-stakes scenario.

Why is Tesla happy about it?

Tesla stakeholders have reportedly welcomed the move to cut the subsidy. The company’s market share in the category has dropped significantly, from 80% in 2020 to around 48% due to other competitors like Ford, GM, and VW ramp up production capabilities. Tesla, however, remains the only consistently profitable company in the category, while many competitors rely on the subsidy to stay competitive.

The political implications, however, are raising eyebrows. We have watched Elon Musk and Donald Trump’s grow closer ties over the last few months, with Musk being a huge supporter of Trumps presidential bid. Many believe Musk and his activity on X had an integral role in Trump’s win. With Musk now holding a governmental role heading up DOGE (Department of Government Efficiency), critics may question decisions made by the Trump administration that directly benefit Musk’s businesses. Musk himself even said in July that the decision “will only help Tesla”.

While Tesla appears to be positioned for gains, it’s unlikely that opposition parties—or Tesla’s competitors—will stay silent if this policy is enacted. The coming months could have massive implications on the future of the EV industry in the US.

What will the impact be on the EV industry if the tax credit is binned?

Decrease in Sales (higher prices impending?)

The most immediate impact will likely be a decline in EV sales across the U.S. This ruling will make EVs $7,500 more expensive than they were the year previous, unless EV makers reduce the price of the cars, which seems unlikely as they are sold at very tight margins as it is. This is not great news for an industry where growth stalled in 2024 (See BloombergNEF’s graph below).

Will innovation stall?

With the incoming administration shifting Climate Action down its list of priorities, this may have a negative impact on innovation in the EV category. Reduced demand may discourage automakers from investing in R&D, particularly in areas like battery longevity and production efficiency. This could be problematic for an industry still striving to go mainstream.

Competition on the brink

The subsidy removal could also tilt the competitive landscape in Tesla’s favor. Smaller players like Rivian and Lucid, which are less profitable and more reliant on tax incentives, may struggle to survive in the US. While larger competitors such as GM and Ford have greater resources, this policy shift could lead them to scale back their EV ambitions.

While this move might not legally qualify as anti-competitive, Tesla’s financial stability gives it a significant advantage in navigating the changing policy environment.

The Road Ahead

We will have to wait and see if the Trump administration will follow through on this plan to cut subsidies and any other decisions they may make that will impact the EV industry. However, the signs do not look good. This is an industry that many (including Musk!) believe is integral to a green future. So any decision by the government that controls the largest economy in the world that negatively impacts EV innovation is a net-negative for the industry as a whole.

Share your thoughts—are EVs resilient enough to weather the storm? Email us at [email protected] 

News in tech this week

X competitor Bluesky Social has had a surge in users over the past few weeks. The question, is this just a fad or is Bluesky going to become a dominant player in the social media landscape?

Has IVF technology improved since it was first used to conceive a baby 45 years ago? Check out this fascinating article from the BBC on whether the technology’s success rate is improving or should scientists start focusing their efforts on developing more effective methods.

With Black Friday coming up next week, check out the Verge’s guide on the best deals in tech HERE.