In a potential blow to the fledging EV transition, reports have noted that the Trump transition team is planning to terminate the $7,500 consumer EV credit, an action publicly supported by Elon Musk.
The future of the EV market, however, also depends on the fate of the Clean Air Act (CAA) tailpipe air quality and greenhouse gas (GHG) standards. The new Trump U.S. Environmental Protection Agency (EPA) under presumptive incoming Administrator Lee Zeldin is expected to roll back or abandon the Biden Administration’s efforts to toughen these standards for model year 2027 – 2032 passenger cars and light- and medium-duty trucks. Meanwhile, California Governor Gavin Newsom has already promised that California will continue to establish more stringent state-level standards for tailpipe emissions over the next four years and will ban all sales of new gasoline-powered cars and light- and medium-duty trucks in California by January 1, 2035.
This will likely set the stage for a series of legal battles between California and the Trump Administration. California’s legal authority to adopt its own air quality and GHG standards for vehicles derives from a provision of the CAA allowing California to request waivers from the statute’s general preemption of individual states from adopting vehicle emission standards. Once granted, a waiver not only authorizes California’s regulations but also authorizes other states to adopt California’s standards, which has led global automakers to follow the California standards for their vehicles sold in all 50 states. California currently has eight waiver requests pending with EPA for various California rules restricting emissions from locomotives, commercial harbor craft, heavy-duty vehicles, and passenger cars and light-duty trucks and fleets.
While EPA has granted hundreds of waivers to California over the past few decades, President-elect Trump has committed to denying all waiver requests from California, continuing that policy from his first Administration. The first Trump Administration EPA also took the extraordinary step of “revoking” California’s existing waiver to set more stringent vehicle emissions standards, and while there is much controversy over whether California’s CAA waivers legally can be “revoked,” President-elect Trump is anticipated to again seek to “revoke” California’s CAA waivers shortly after taking office, almost certainly leading to protracted litigation in the federal courts. These issues will likely reach the Supreme Court, but it is unclear whether that will happen before the Trump Administration’s coming term expires.
The end result is that the automobile manufacturing industry will face significant uncertainty regarding emissions standards for model year 2027 vehicles and beyond—a difficult situation considering that many automakers have already begun making their production plans for these years. Some automakers have attempted to address this uncertainty by entering into separate agreements with California to manufacture vehicles meeting California standards, but it is unclear whether such agreements will also come under legal attack by the new Administration. In any event, this uncertainty could reduce hybrid and EV production and development for the U.S. market and may result in a corresponding reduction in U.S. EV demand if the consumer EV tax credit is rescinded by the coming Congress.