Trump administration makes an EV U-turn

Bottom Line

Electric vehicles (EVs) have been a political hot potato in Washington for decades. Generally speaking, Democrats focus on environmental issues and Republicans cite the economic impact. President Trump made a campaign promise to revoke federal mandates and subsidies and addressed it with an executive order in January. Congress codified them in the One Big Beautiful Bill. Trump believes this is a pragmatic response to market realities and consumer sentiment. Critics frame the move as a retreat from climate goals that will further endanger the environment.

The truth lies somewhere in-between. To be sure, Trump’s decision reflects a recalibration of federal policy to align with the lack of infrastructure, fiscal responsibility and waning consumer demand. Pausing aggressive targets and substantial incentives appears grounded in the principle that innovation should be driven by consumer choice. 

Declining consumer enthusiasm Despite generous federal incentives, many Americans remain hesitant to adopt electric vehicles due to concerns about cost, insufficient charging infrastructure, limited battery range, environmental issues of battery manufacturing and long-term reliability.

While EVs bear a relatively higher cost compared to internal-combustion-engine automobiles, recent surveys show consumers are more concerned about the batteries. More than 40% of prospective buyers cite inadequate public charging stations as a primary barrier, and a significant portion express dissatisfaction with battery performance. Because of their more limited driving range, owners are comfortable using them for local trips, owning gas-powered cars or trucks for longer trips. EV owners need to charge their cars overnight, requiring installing expensive chargers.

These concerns have contributed to slower-than-expected adoption rates, especially outside urban centers. Combining these factors together, we believe the domestic market share for EVs could top out at about 15%. The current market share is about 10%, as early adopters have already piled in. Yet until recently, our federal government’s EV policy was geared to expanding EV purchases, potentially disenfranchising the 85% of Americans who are not interested in purchasing one. 

President Biden’s support The Biden administration’s EV strategy was anchored by two legislative packages: the Bipartisan Infrastructure Law (2021) and the Inflation Reduction Act (2022). Together, they represented the largest federal investment in clean transportation in US history.

The Inflation Reduction Act introduced clean vehicle tax credits of up to $7,500 for new and $4,000 for used EVs, with eligibility tied to income limits, price caps and domestic manufacturing requirements. The law sought to make them affordable for middle-income households and incentivize automakers to localize production. The bipartisan Infrastructure Law allocated $7.5 billion to build a national public charging network, with a goal of installing 500,000 by 2030. As of February 2025, however, only 57 have opened across 15 states.

The Biden administration also set a national target of 50% EV sales by 2030 through executive action, supported by stricter tailpipe emissions standards and fuel economy regulations. These measures were designed to push automakers toward electrification and boost consumer purchases. By 2024, EVs accounted for about 10% of new sales in the US, with optimistic forecasts suggesting a rise to 20% by 2030.

Trump’s policy shift The executive order Trump issued in January—Unleashing American Energy—reoriented national priorities toward energy security, economic competitiveness and consumer choice. It rescinded the federal target of 50% EV sales by 2030, arguing that such mandates were premature given current infrastructure limitations and uneven consumer demand. It also paused funding for the infrastructure projects, seeking to assess their effectiveness, particularly in rural and underserved regions where adoption remains low.

In addition, the administration directed the Environmental Protection Agency and Department of Transportation to review emissions and fuel economy standards, aiming to reduce regulatory burdens on automakers and preserve flexibility for gasoline-powered vehicle production. Trump’s stated goal is to protect American jobs, increase vehicle affordability and avoid forcing consumers to buy cars they don’t want.

Trump’s executive order also ended clean energy tax credits, citing concerns over foreign supply-chain dependencies and the reliability of renewable power. He established the National Energy Dominance Council to promote investment in fossil fuels and nuclear energy. 

Impact on automakers The administration’s rollback of federal mandates, incentives and infrastructure support has introduced significant uncertainty for manufacturers. The elimination of federal tax credits for electric vehicles has directly impacted consumer affordability, potentially reducing demand by more than 40%.

Automakers who had scaled production based on anticipated federal support now face a much more volatile market. Major manufacturers, such as Ford, General Motors, and Tesla, committed billions to EV development. Ford planned to spend $50 billion on vehicles and batteries through 2026, aiming for the latter to comprise 50% of its global volume by 2030. GM earmarked $35 billion for electrification, with a goal of producing 1 million EVs annually in both North America and China by 2025. These plans are now at risk.

The rescinding of emissions standards and fuel economy targets further complicates production planning. Automakers now face a patchwork of state-level regulations, particularly as California and 17 allied states maintain Zero Emission Vehicle mandates. General Motors has publicly opposed freezing fuel economy standards at 2020 levels, advocating instead for a national credit system to avoid fragmented compliance costs.

Economic versus environmental impact The rollback of incentives and infrastructure funding is expected to have measurable economic consequences. According to the Harvard Salata Institute, eliminating EV-related provisions from the Inflation Reduction Act and the Bipartisan Infrastructure Law could result in $172.7 billion in federal savings by 2030. But that comes at the cost of reduced investment, slower EV adoption and higher emissions. The same analysis projects a 44.1 million metric ton increase in carbon-dioxide emissions by 2030 due to less EV adoption. That likely will undermine progress toward national climate targets and increase long-term health and environmental costs.

Job creation in the clean energy and EV sectors is also at risk. Companies had announced more than $100 billion in EV-related investments between 2021 and 2024, and Trump’s policy reversal may stall or redirect these investments, particularly in battery production and charging infrastructure.

Consumer spending may also be affected. Without federal tax credits, electric cars and trucks become less attractive and affordable, especially for middle-income households. This could reduce demand and slow the transition away from internal-combustion-engine vehicles, impacting auto sales and energy consumption.

Research assistance provided by Federated Hermes summer intern Devin Clancy

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