Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
On his first day back in office, the new US president wasted no time delivering on a promise he made last year: to dismantle what he has described as a mandate to sell electric cars.
Donald Trump, who had said such measures were needed to save the US car industry from “complete obliteration”, has ordered his administration to eliminate electric vehicle mandates and undo regulations governing automotive pollution and fuel-economy standards. The directive also calls for regulators to consider eliminating unfair subsidies that favour EVs over other technologies. Repercussions could extend well beyond the US to global carmakers and battery manufacturers.
US EV policies have played a pivotal role in the industry’s growth, setting the stage for a rosy outlook. The number of EVs on US roads was expected to reach 27mn by 2030 and 92mn by 2040, according to PwC’s analysis. That expansion would have also meant a significant boost for EV battery suppliers, who stood to benefit from the sector’s rapid acceleration.
Global carmakers have leaned heavily on these mandates and incentives, including the popular $7,500 federal tax credit, to narrow the price gap between EVs and petrol cars. Research from the Massachusetts Institute of Technology estimated that direct purchase rebates lead to an 8 per cent increase in new battery electric vehicle registrations per $1,000 of incentive offered.
Fully repealing the $7,500 consumer rebate would not be simple, as it would require an act of Congress. But Trump would easily be able to tweak eligibility guidelines of the incentives, such as making changes to domestic manufacturing and component sourcing and procurement requirements — in effect reducing the number of vehicles eligible for incentives.
Shares in battery makers in Asia including Panasonic, SK Innovation and LG Energy Solution fell on Monday, with LG’s down 4 per cent. Valuations are still significantly higher compared with the previous year, with LG Energy trading at just below 100 times forward earnings, around double the levels a year ago, as investors hold on to hopes that the impact of policy changes will be slow to materialise.
It is true any regulatory overhaul would take months to finalise as legal challenges are likely. But the speed at which Trump has outlined his policy direction on EVs is enough to have a chilling effect on the market. In a market still dependent on stable incentives to sustain the current rate of adoption, policy disruptions could risk slowing the electric transition.
june.yoon@ft.com
