New Delhi: US President Donald Trump’s move to do away with the electric vehicle (EV) mandate may not have an impact on large auto manufacturers like the auto giant Tesla, but is expected to hit smaller EV companies and the ancillary industry, allowing global competitors in China and the UK—which receive support from their respective governments—to increase their shares in the international EV market with their EV models.
The move, according to environment and energy experts, will also not bode well for global efforts towards reducing the emission of greenhouse gases and achieving sustainability goals.
An executive order released after Trump removed the EV mandate stressed that a rollback of EV subsidies would “promote true consumer choice, which is essential for economic growth and innovation”.
The order said it aimed at “levelling the regulatory playing field for consumer choice in vehicles” in line with Trump’s larger election slogan, “We will drill, baby drill.”
However, this “America first” focus of the Trump administration will likely burden smaller EV manufacturers and the supportive industry in the long run.
Experts pointed out that while it is still unclear how the new regime’s removal of the EV mandate will pan out, the increased import tariffs on the much cheaper Chinese batteries, which the US implemented in September last year, will increase the production costs of smaller EV manufacturers like Karma Automotive, NIO and Rivian. In other words, the EV mandate had been, to an extent, balancing out the higher costs imposed by the tariffs. With the removal of the mandate, the US EV sector is just left with the higher costs, without any countervailing benefits.
Lack of government support in the domestic market is also set to put these US automakers at a disadvantage in the global market, leaving them to compete with China and UK automakers, who come into the fray with heavy government support and subsidies.
“Countries like China, which provide a conducive environment for EV players, will be happy to wave in the rearview mirror of one of its world-leading EVs, as US manufacturers hobble on,” said Tim Sahay, the co-director of Net Zero Industrial Policy Lab at Johns Hopkins University, US.
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Global push for EV
Countries worldwide—including India—have been pushing for electric vehicles as an energy-efficient alternative to traditional petrol and diesel-driven vehicles.
China, the UK and the United States are leading this global race.
A 2024 report showed that between 2009 and 2023, China’s electric vehicle industry received government subsidies worth USD 231 billion. The report highlighted that over 50% of the support was in the form of sales tax exemptions, and the rest came from government funding, buyer rebates and infrastructure advancements, such as establishing charging stations.
In 2023, the British government announced its ‘Advanced Manufacturing Plan’, which included funding of two billion pounds for the auto industry and 975 million pounds for the aerospace industry. The plan also proposed that domestic EV battery manufacturers could employ 100,000 workers by 2040.
India, too, is not far behind in this race. The electric vehicle market is estimated to grow till annual production reaches as high as 10 million units by 2033 from 1.7 million units in 2023-24.
Government schemes, such as FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles), combined with production-linked incentives, the PM E-Drive and tax-friendly policies to make electric vehicles more affordable, have helped boost the industry.
The former regime in the US provided a 7,500 USD EV tax credit.
Automobile experts said that without that kind of support, as is provided by governments across countries, US automakers will face the challenge of competing with low-priced foreign EVs while also covering high upfront costs of EV research and development (R&D), minus the benefits of subsidies.
Andrew Leahey, a policy, tax and technology expert from the Drexel University Thomas R. Kline School of Law, said that while removing subsidies might not impact larger companies, such as Tesla, legacy automakers and emerging EV companies could be left struggling to stay competitive.
“The credit has played a crucial role in accelerating the adoption of EVs in the US, making EVs more affordable and price-competitive with internal combustion engine vehicles. Without subsidies, the path toward a competitive American EV industry becomes murkier,” Leahey said.
Environmental impact
Environmentalists fear that apart from affecting local trade impacts, the US backing out from its EV commitments will slow the transition to cleaner fuels.
Rachel Cleetus, the policy director and lead economist for the Climate and Energy Program at the Union of Concerned Scientists (UCS), accused President Trump of beginning his term by “pandering to the fossil fuel industry and its allies”.
“His (Trump’s) disgraceful and destructive decision is an ominous harbinger of what people in the United States should expect from him and his anti-science cabinet hellbent on boosting fossil fuel industry profits at the expense of people and the planet,” Cleetus said.
She added that apart from obvious climate impacts, the “extreme isolationist posture” that the Trump administration has taken in climate and environmental matters overall—including withdrawing from the Paris Accords and declaring an ‘energy emergency’ allowing more drilling of oil—will have wider repercussions for the United States’ standing in the world and its ability to secure international cooperation on other issues of national importance.
(Edited by Madhurita Goswami)