During his inauguration speech on January 20, President Trump told distinguished guests at the Capitol Rotunda and television cameras that a “tide of change” was coming during his second tenure in office.
Amid a flurry of other political moves, the new administration has been working to reverse some of the transportation and environmental policy measures encouraging automakers to produce and sell electric vehicles under the former administration, a set of policies the president calls the “Biden EV Mandate.”
Notably, on his first day in the new post, Transportation Secretary Sean Duffy ordered the National Highway Traffic Safety Administration (NHTSA) to reevaluate Corporate Average Fuel Economy (CAFE) standards designed to make cars more fuel efficient.
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In his letter to the agency, he stated that the restrictive measures in place would hurt customer choice at the dealers.
“[The CAFE standards] also put coercive pressure on automakers to phase out of production various models of popular ICE vehicles and reengineer their fleets in a way that reduces dramatically the power and durability of the ICE models they are able to offer, thereby fundamentally distorting the market and destroying consumer choice at the dealership,” he said.
However, automakers have spent billions investing and building up facilities that would help drive the new wave of automotive technology prior to Trump taking office and are taking to Washington to protect their investments against policy threats from the new administration.
Automakers ask lawmakers to pump the brakes on repealing EV incentives
As per sources who spoke to Bloomberg, representatives from automakers like General Motors (GM) and Ford (F) , as well as industry lobbying groups, are making their way to D.C. to pressure the Trump administration and Republican lawmakers to preserve some EV-related incentives in the Inflation Reduction Act.
The Inflation Reduction Act, or the IRA for short, passed in 2022 with no Republican votes in the House or Senate and was seen as a landmark piece of legislation during the Biden Administration that contained many benefits for the electric vehicle industry.
Apart from an extension of the $7,500 New Clean Vehicle Tax Credit that many EV buyers took advantage of, the IRA also contained subsidies that directly benefitted EV manufacturing and supply chains. Under the IRA, billions went to grants and loans to help improve and modernize factories to produce EVs and hybrid vehicles.
Any change to the IRA would require Congressional approval. However, automakers have spent billions to build EV and battery manufacturing plants in the U.S. with the help of IRA subsidies.
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Industry, jobs are at risk if IRA provisions are cut, automakers, politicians say
Detroit’s most well-known automakers and industry lobbyists are reportedly suggesting a three-year grace period if lawmakers cut any IRA subsidies. They stress that a phase-out period of a few years is needed to reduce their material costs to a level where said subsidies wouldn’t be needed to sell electric vehicles.
However, in remarks during the Wolfe Research Auto, Auto Tech and Semiconductor Conference on February 11, Ford CEO Jim Farley signaled that he will be in Washington to meet with members of Congress to discuss “the potential repeal of various IRA elements,” noting that there is much more at stake than EVs themselves.
“We’ve already sunk capital even though we’ve rationalized it in battery production and assembly plants, all through Ohio, Michigan, Kentucky, and Tennessee, and many of those jobs will be at risk if the IRA is repealed, big parts of it is repealed,” he said. “So we’re expecting and hoping this to be a pony for the auto industry with the administration; they certainly have been very clear.”
According to an Automotive News analysis of data from Atlas Public Policy, more than $100 billion in EV manufacturing investment and around 84,000 jobs are at risk as the Inflation Reduction Act comes under scrutiny.
Furthermore, they note that 90%, or $105 billion, of the nearly $116.5 billion in total EV manufacturing investment went to Republican-leaning states: Georgia, North Carolina, South Carolina, Michigan, and Indiana.
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Some Republican members of Congress have expressed a desire to keep the incentives, noting that they would affect the economies of their respective districts.
“We must ensure that our policies continue to do that and that we do not jeopardize the economic future of those communities that have invested in these projects,” Rep. Buddy Carter (R-GA) said during a Jan. 22 U.S. House Committee on Ways and Means hearing.
On the flip side, Republican lawmakers have argued that keeping the IRA would be very expensive. According to figures cited by the U.S. House Committee on Ways and Means, the cost of the IRA is said to reach up to $1 trillion.
Additionally, President Trump’s initial executive orders have also set the agenda of reversing any and all EV-benefitting policies into stone.
In Executive Order 14154, also known as “Unleashing American Energy,” signed on January 20, the administration noted that it is “considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable.”
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