US electric vehicle policies at risk as Trump orders rollback of regulations

On his first day back in office, President Trump swiftly moved to fulfill a promise he made the previous year: to dismantle the electric vehicle (EV) mandates. Trump, who has argued that such measures are essential to save the US car industry from "complete obliteration," has instructed his administration to eliminate EV mandates and roll back regulations related to automotive pollution and fuel-economy standards.

His directive also includes considering the removal of subsidies that favour electric vehicles over other technologies. The effects of this decision could ripple far beyond the US, impacting global automakers and battery manufacturers, according to The Financial Times.

US policies on EVs have been crucial in fostering the industry's growth, helping to create a promising outlook for the sector. PwC's analysis projected that the number of EVs on American roads would reach 27 million by 2030 and 92 million by 2040. This expansion would have also provided a significant boost to EV battery suppliers, who were set to benefit from the sector's rapid growth.

Global automakers have heavily relied on these mandates and incentives, such as the popular $7,500 federal tax credit, to bridge the price gap between EVs and traditional petrol cars. Research from the Massachusetts Institute of Technology found that direct purchase rebates could lead to an 8% increase in new battery electric vehicle registrations for every $1,000 of incentive provided.

Repealing the $7,500 consumer rebate outright would not be simple, as it would require an act of Congress. However, Trump could make adjustments to the eligibility criteria for these incentives, such as modifying domestic manufacturing and component sourcing requirements, which would effectively reduce the number of vehicles eligible for the rebate.

Shares of battery manufacturers in Asia, including Panasonic, SK Innovation, and LG Energy Solution, saw declines following the announcement, with LG Energy falling by 4%. Despite these drops, valuations remain significantly higher compared to the previous year, with LG Energy trading at nearly 100 times forward earnings—about double the levels from a year ago—indicating that investors still hope the impact of policy changes will be gradual.

While any regulatory changes are likely to take months to be finalised due to potential legal challenges, Trump's swift policy stance on EVs is already having a chilling effect on the market. Given the industry's current reliance on stable incentives to maintain adoption rates, any disruptions in policy could hinder the progress of the electric transition.

By Vugar Khalilov