Trump is taking aim at electric vehicles. He may not have the power to change things all that much

New York (CNN) — President Donald Trump took aim at federal and state support for electric vehicles on his first day in office. But it’s not clear he has the power he’s claimed on the topic.

In his executive order, Trump said he was eliminating the “electric vehicle mandate.” But there has never been a federal mandate that prohibited Americans from buying gasoline-powered cars, as he claimed in his inaugural address.

And it’s not clear whether the specifics in the executive order can be accomplished through a stroke of his pen alone. It could take congressional action to roll back some of the measures he wants eliminated, and other actions are certain to spur a prolonged court battle.

And even if all of it were legal and possible, automakers are likely to plow forward with EV efforts anyway.

The order seeks to end the federal support in recent years for electric vehicles. This includes a $7,500 tax credit for buyers of EVs that was passed by Congress and signed into law in 2022, along with federal support for vehicle-charging stations and low interest loans for traditional automakers building new plants to build EVs and the batteries they need.

But this federal support for EVs was part of a 2022 law that may require congressional action to change, although the details of the tax credit were set by the Internal Revenue Service, not Congress.

And Trump wants to eliminate local regulations from California and the eight other states – Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington – that would ban the sale of gasoline-powered vehicles by 2035. Those nine states make up about a quarter of the American car market.

Trump already tried to limit the power of California to regulate its own air pollution rather than the federal Environmental Protection Agency, with other states to follow suit, during his first term in office. The issue ended up in the courts, but that legal battle was put on hold after he left office and the state’s power was restored by President Joe Biden. A new court fight over those powers is likely to be waged again and could take years to settle, perhaps longer than Trump’s time in office.

Trump’s executive order on Monday would scale back the EPA’s emission rules that currently push automakers to sell more zero- and low-emission vehicles, such as plug-in hybrids.

EPA environmental regulations on emissions must go through a rule-setting process, although supporters of the current standards, which were put in place under Biden, will have a tough time stopping any changes set by Trump’s EPA.

Auto industry lobbies to keep EV help

Trump may try to change regulations and incentives to boost petroleum-powered cars and the oil industry as much as he can, but he’ll have a hard time in the board rooms of the auto industry.

Major automakers generally agree with Trump on the state EV mandates. Analysis from the Alliance for Automotive Innovation, an industry trade group that represents most major automakers other than Tesla, said that while gasoline-powered emissions targets from the Biden EPA are “on the ragged edge of achievable,” the rules from California and the eight other states are going to “take a miracle.”

But US automakers are too committed to EVs to pull back completely, no matter what changes Trump is able to implement.

The tax credit and other federal support for EVs have broad support among automakers. The Alliance for Automotive Innovation has pushed to continue the tax credit and other support, arguing that US automakers seeking to build and sell EVs need the help to compete with Chinese automakers who make far more vehicles than any other country, thanks to China’s focus on EV sales.

While US electric vehicle sales continue to grow, rising to 1.3 million vehicles sold last year, that only makes up 8% of total sales of new passenger vehicles, according to Cox Automotive. The other 92% of US car buyers bought cars at least partly, if not totally, powered by gasoline.

China, in contrast, built nearly 50 million vehicles in 2024, with nearly one third of those EVs or plug-in hybrids.

The United States “is no longer the largest auto producing country,” said a letter from the industry trade group. “China’s strategic focus on EVs has propelled it to global leadership.” While the letter was sent to Congress last October, the position of the trade group has not changed since the election.

And the legacy automakers don’t want to walk away from EVs, even if they’re losing money on the endeavor right now. They forecast that as their EV sales increase, they will swing from losses to profits just as Tesla did as it was scaling up its EV production. And with fewer moving parts, it can be more profitable to build an EV than a gasoline-powered car with its complex engine and transmission.

Tesla’s profit margin on its cars, for instance, was about 16% during the first three quarters of 2024. That’s nearly twice the profit margin at General Motors.

And the industry also knows that the car market is a long-term game. American hunger for electric vehicles isn’t just growing — it’s growing faster than demand for petroleum-powered cars. Dozens of EVs are wending their way through product pipelines that take years to navigate, often far longer than a single presidential term. And legacy automakers have already sunk $33 billion into factories that will only build electric cars, plus another $90 billion in American battery factories — many of which are in southern states that voted for Trump.

“We might see a much slower adoption of EVs (with a regulation change),” said Jeff Schuster, global head of automotive at GlobalData, an industry consultant. “But with all the investment, we’re not likely to see it reversed.”

General Motors and Ford declined to comment on Trump’s EV executive order Tuesday. Stellantis, which makes cars under the Jeep, Ram, Dodge and Chrysler brands, said it is “well positioned to adapt to the policy changes enacted by the new administration.” But it also has fewer EV offerings in the US market than most of its rivals.

Musk wants end of help for EVs

It might seem that the Trump administration’s efforts to pull back support for EVs would hurt the fortunes of one of his top supporters, Tesla CEO Elon Musk, who owes much of his world-leading net worth to the value of his Tesla shares. After all, most US buyers of Tesla are getting the $7,500 federal tax credit, and that money makes the price of Tesla’s more competitive with the price of gas-powered vehicles.

But Musk has said that EV subsidies should end. And most analysts believe that federal support for EVs is hurting Tesla more than it is helping it.

Those billions in subsidies are helping to create more competition for Tesla among EV buyers who now have more options.

The end of the credit “will widen Tesla’s competitive moat by making competing EV models even more uneconomic, as we believe Tesla is the only profitable manufacturer of EVs,” Garrett Nelson, an analyst for CFRA Research, wrote in a note to clients the day after the election.

Tesla, which was seeing double-digit sales growth every year, just reported its first drop in annual sales in its history, greatly due to more competition from legacy US automakers’ EV models, as well as those from Chinese automakers.

CNN’s John Fritze and Vanessa Yurkevich contributed to this report

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