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A second Trump Administration is likely to rescind or replace mobile source emissions and fuel economy standards that target greenhouse gas reductions, with the goal of reducing pressure on traditional automotive manufacturers to introduce electric vehicles to the market.

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Given President-elect Trump’s statements on the campaign trail, we would expect his incoming administration to rollback or to revoke the electric vehicle tax credit which would make electric vehicles less commercially competitive with gasoline-powered vehicles.

Because a second Trump Administration is likely to revoke, and to potentially challenge, California’s right to set its own mobile source emissions standards through the Section 209(b) federal preemption waiver process, trucking manufacturers may see some relief from aggressive emissions requirements under California’s current Advanced Clean Trucks Program, which requires a transition to zero-emission vehicles by 2042.

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Under President Joe Biden’s Administration, multiple programs were created to invest in the necessary infrastructure and to support private development of the electric vehicle industry. Given the anticipated shift away from some of these Biden-era priorities, the electric vehicle industry finds itself on precarious footing. On one hand, traditional automotive manufacturers have made significant investments in adding electric vehicles to their fleets to meet heightened emissions and fuel economy standards. On the other hand, President-elect Donald Trump has routinely discussed his commitment to reducing the pressure on manufacturers to meet those emissions standards through the sale of electric vehicles by rolling back greenhouse gas emissions standards. Causing additional uncertainty is the influence Tesla CEO Elon Musk might exert over this issue in a second Trump Administration.

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In this Part III of our series on Regulating Automotive Emissions, we discuss how the Trump Environmental Protection Agency’s (EPA)’s approach to greenhouse gas emissions, the electric vehicle tax credit, tariffs and investment in American manufacturing is likely to affect the development and continued investment in electric vehicles.

For additional insights on changes within the automotive industry under a second Trump Administration, we invite you to review <a href="https://www.bakerlaw.com/insights/regulating-automotive-emissions-part-i-what-to-expect-under-the-second-trump-administration/" target="_blank" rel="noreferrer noopener">Part I: What to Expect Under the Second Trump Administration</a> and <a href="https://www.bakerlaw.com/insights/regulating-automotive-emissions-part-ii-the-future-of-californias-emissions-waivers/" target="_blank" rel="noreferrer noopener">Part II: The Future of California’s Emissions Waivers</a>.

Revoke and Replace Greenhouse Gas Emissions Standards

During President-elect Trump’s first administration, EPA and the National Highway Traffic Safety Administration (NHTSA) initiated a rulemaking that advanced a new interpretation of the Energy Policy and Conservation Act of 1975 (EPCA). The Act, which originally granted NHTSA authority to establish fuel economy standards, was read by the Trump NHTSA to preempt state and local greenhouse gas standards because such standards are “related to” fuel economy standards.<a id="_ftnref1" href="#_ftn1">[1]</a> This action, termed the SAFE rule, froze EPA’s greenhouse gas emission standards and NHTSA’s fuel economy standards at MY 2020 levels through 2026.<a id="_ftnref2" href="#_ftn2">[2]</a>

It is likely that during a second Trump Administration, EPA and NHTSA will take new action to rescind, replace or rollback the Biden EPA and NHTSA emissions and fuel economy standards, respectively. The primary target of this effort will be the MY 2027-MY 2032 light- and medium-duty vehicle emissions standards. Any replacement rule would likely slow the rate at which greenhouse gas emissions are reduced. The goal will be to reduce the pressure on traditional automotive manufacturers to meet emissions standards through the sale of electric vehicles.

One form this action could take is requiring a return to previous EPA emissions regulations, with some discussion of returning to the first Trump Administration’s SAFE rule levels.

Given President-elect Trump’s statements during the recent campaign, we would expect his second administration to lobby Congress to roll back or to eliminate the current $7,500 tax credit given to consumers who buy electric vehicles. The elimination of this tax credit, which was part of the Inflation Reduction Act, would be a step toward making electric vehicles less commercially competitive with gasoline-powered vehicles. Musk has also vocalized his opposition to the electric vehicle tax credit. Revocation of the credit would be most damaging for traditional automotive manufacturers hoping to compete with Musk’s Tesla for a share of the electric vehicle market.

To qualify for the credit, electric vehicles must undergo final assembly in North America.&nbsp; The vehicle must also meet critical minerals sourcing and/or battery component sourcing requirements.<a href="#_ftn3" id="_ftnref3">[3]</a> Traditional automotive manufacturers typically meet these requirements, but not all Tesla models qualify for the credit because they are produced with Chinese-made components. Many traditional automotive manufacturers support the retention of the electric vehicle tax credit as a critical component of cementing American automotive manufacturing as a global leader in automotive technology and advancement.

As of January 1, 2025, there are currently eighteen electric vehicle and plug-in hybrid vehicles that qualify for the tax credit. This includes the Acura ZDX, Cadillac LYRIQ and OPTIQ, Chevrolet Blazer, Equinox, and Silverado; the Chrysler Pacifica; the Ford F-150, the Genesis GV70, the Honda Prologue, the Hyundai Ioniq 5 and Ioniq 9, the Kia EV6 and EV9, and the Tesla Cybertruck, Model 3, Model X and Model Y.<a href="#_ftn4" id="_ftnref4">[4]</a>

Eliminating the electric vehicle tax credit requires Congressional action, and potentially could be placed in a budget reconciliation bill planned for early 2025.

Another key feature of President-elect Trump’s campaign was a focus on imposing tariffs. During his first administration, a 25% tariff was placed on Chinese-made vehicles, which included cars, trucks and automotive parts. Then, in March 2018, his administration imposed a 25% tariff on steel and a 10% tariff on aluminum from China. In September 2024, President Biden’s Administration finalized its plan to raise tariffs on goods made in China, which resulted in a 100% tariff on electric vehicles, a 25% tariff on lithium-ion electric vehicle batteries and a 50% tariff on photovoltaic solar cells, with a 50% tariff on semiconductors made in China to going into effect this year.<a href="#_ftn5" id="_ftnref5">[5]</a> Whether President-elect Trump’s second administration keeps these tariffs in place remains to be seen.

Aside from the use of tariffs against China to make American-made electric vehicles more competitive, there is concern that President-elect Trump’s guarantee of other tariffs could raise the prices of the vehicles that many consumers believe are already too expensive. For example, the US-Mexico-Canada Agreement (USMCA) mandates that 75% of a vehicle’s components be produced in North America to qualify for zero tariffs. However, President-elect Trump has repeatedly mentioned plans to implement various tariffs on Mexico and Canda, which would result in increased costs to American consumers. Specifically, there’s concern that a second Trump Administration could put a 25% tariff on all imports from Canada and Mexico, as well as a 10% tariff on all products imported from China. This would increase prices for a number of automotive manufacturers.

The automotive industry is not monolithic when it comes to putting electric vehicles on the market. While some automotive manufacturers have made significant investments to increase the share of electric vehicles within their fleets, others are hoping for more time to comply with aggressive emissions requirements, such as those set in California.

Currently, trucking manufacturers, related equipment manufacturers, and their associations are suing the California Air Resources Board (CARB) to block enforcement of its Advanced Clean Fleets regulation, which would require motor carriers operating in the state to transition their trucks to zero-emission vehicles by 2042, regardless of which state the vehicle was purchased or registered in. The rule would prohibit interstate motor carriers from operating non-CARB approved vehicles in California.

Despite many trucking manufacturers working toward emissions reductions and sharing environmental protection goals, heavy-duty electric vehicle mandates like those prescribed by CARB fail to acknowledge the limits of existing technology to meet such requirements. The result is heavy-duty manufacturers finding themselves in a lose-lose situation. The second Trump Administration is likely to challenge California’s authority to set such regulations under Title II of the Clean Air Act.

Government Support of Electric Vehicle Manufacturing and Infrastructure

The Biden Administration worked to encourage and support the development of the electric vehicle industry through a number of bipartisan programs. How the second Trump Administration will approach these programs is somewhat uncertain.

Potential programs to keep an eye on include:

CHIPS Act. While on the campaign trail, President-elect Trump repeatedly attacked the CHIPS Act, which provides incentives for chipmakers to set up manufacturing in the United States. The bipartisan legislation committed almost $53 billion to invest in domestic semiconductor manufacturing and research to boost American competitiveness with China.

NEVI Formula Program. The Federal Highway Administration’s National Electric Vehicle Infrastructure (NEVI) Formula Program provides funding to states to strategically deploy electric vehicle charging stations and to establish an interconnected network to facilitate data collection, access, and reliability. Funding has been made available to cover up to 80 percent of eligible project costs. NEVI is part of the Bipartisan Infrastructure Law. It is uncertain what influence Musk might exert over this program, which seeks to increase competition with his company Tesla as it relates to electric vehicle charging stations and related infrastructure. At present, Tesla is the largest electric vehicle charging infrastructure deployer in the country.

Advanced Manufacturing Production Credit. This program creates credits, including one for $35 per kilowatt hour of capacity for battery cells. Meanwhile, battery modules could qualify for a credit of $10 per kilowatt hour of capacity and 10 percent of costs incurred for critical minerals and electrode active materials. A second Trump Administration could treat electric battery sourcing differently than the Biden Administration, with more focus on the environmental impact related to the full life cycle of the battery.

Given the numerous – and often costly – electrification investments made by automotive manufacturers, enthusiasm for rollback efforts may be tempered, especially where strong investments have been made in production, charging stations, and battery development and sourcing. The automotive industry is one in search of stability. Manufacturers with fleets that offer consumers options, including hybrid and electric vehicles, are in a better position to navigate the murky political and regulatory landscape.

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<a href="#_ftnref1" id="_ftn1">[1]</a> See EPA and NHTSA, “The Safer, Affordable, Fuel-Efficient (SAFE) Vehicles Rule, Part One: One National Program,” 84 Fed. Reg. 51310 (Sep. 27, 2019).

<a href="#_ftnref2" id="_ftn2">[2]</a> See EPA and NHTSA, “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks, 85 Fed. Reg. 24174 (Apr. 30, 2020).

<a href="#_ftnref3" id="_ftn3">[3]</a> “To claim the critical mineral portion of the credit, a car’s battery must have at least a certain percentage of its critical minerals that were extracted or processed in the United States or in a country with which the United States has a free trade agreement, or that were recycled in North America. The minimum percentage is 40% in 2023, 50% in 2024, 60% in 2025, 70% in 2026, and 80% thereafter. For vehicles acquired after 2024, no applicable critical minerals in the vehicle’s battery may come from a foreign entity of concern.” “Clean Vehicle Tax Credits,” Congressional Research Service, updated Dec. 26, 2024.

<a id="_ftn4" href="#_ftnref4">[4]</a> See “Federal Tax Credits for New Plug-In Electric and Fuel Cell Electric Vehicles Purchased in 2023 or After,” <a href="https://fueleconomy.gov/feg/tax2023.shtml" target="_blank" rel="noreferrer noopener">https://fueleconomy.gov/feg/tax2023.shtml</a> (last visited January 1, 2025).

<a href="#_ftnref5" id="_ftn5">[5]</a> “USTR Finalizes Action on China Tariffs Following Statutory Four-Year Review,” Office of the United States Trade Representative (Sep. 13, 2024).

Regulating Automotive Emissions:Part III – The Future of the Electric Vehicle Industry

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