As we bid farewell to 2024 and welcome 2025, the future of the electric vehicle (EV) market in the US is under intense speculation. This pivotal year for the EV landscape is marked by an upcoming administration change and the newly elected President’s campaign promises to reverse some of the incentives implemented by the previous administration.

We have all heard the news, and the rumors: elimination of the $7,500 tax credit on new EVs – that was signed into law in 2022 as part of the Inflation Reduction Act (IRA), cutting or redirecting of National Electric Vehicle Infrastructure (NEVI) funding, increased tariffs on imports of EVs and components, and challenges to state level policies around zero-emissions targets. All of this is contributing to uncertainties surrounding the EV environment and the momentum that the EV evolution has been demonstrating so far.

 

Is the EV market really at risk – Implications on the EV Landscape

So, what does this all mean? First of all, we can rest assured that many of these changes that relate to governmental spending cannot unilaterally be implemented through executive action; they will require new legislation and an act of Congress in order to be enacted. This takes time – a lot of time – and nobody can say with certainty that the support required will be guaranteed. It could take months, and more likely years, for any changes to be executed, meaning that at least in the short-term it is likely to be ‘Business as Usual’ for the most part.

US EV sales are on an upward trajectory and that momentum will continue. According to the latest Kelly Blue Book report for 2024, “EV sales in the US grew by 11% year over year in the third quarter and reached record highs for both volume and market share.” And, even revised predictions following the US election results still position EV share of total light-duty vehicle sales to be 13.5% in 2025, up from 10.3% this year, reaching 39.7% by 2030 and 71.8% by 2035. Of course, predictions can and do change. Let’s look at each of the four key areas rumored to be impacted, and the potential effect if and when changes are enacted.

 

1. New Electric Vehicle Tax Credits

Tax credits are believed to help with increased EV adoption, but it’s important to note that these credits do not apply to all EVs. Certain criteria are attached limiting the application of the credits – including a cap on the vehicle value, a limit on adjusted gross income of the driver, and a requirement around the final assembly having taken place in the US, among other qualification criteria. Additionally leased vehicles benefit from an IRS loophole where they qualify for the credit regardless of price or manufacturing.

If the credits are removed sooner than expected, there may be a short-term decline in sales, like that experienced in European markets when credits were removed. But other factors are at play that will prevent a complete crash.

More affordable models are being introduced into the market that will appeal to a broader range of drivers – lower cost EVs will help with adoption, enticing those that may have been hesitant due to cost. It is predicted that EVs will reach price parity by 2026. Add to that the many states that have put into place legislation surrounding bans on the sale of new ICE vehicles – as of writing nine states are aiming for a complete ban on ICE vehicles by 2035 – while many others have taken steps to limit their sale, effectively forcing the hand of drivers purchasing new vehicles. Plus, the commitment from OEMs around EV production will continue to expand as they strive to meet global demand, which will ripple into the US, impacting availability of ICE models.

 

2. Government Funding

As part of the Bipartisan Infrastructure Law (BIL) Congress allocated $5 billion towards the NEVI program, which was signed into law in Nov 2021. This gives states money to install EV chargers with the aim of having 500,000 public chargers across the US by 2030. The goal being to offer a convenient charging experience as we head down the EV path, encouraging adoption, and mitigating range anxiety. To date just under half (~$2.4B) of the available funding has been awarded. The remaining amount is anticipated to be distributed by the 2026 target date.

EV charging stations are being installed at a growing number of retail locations, convenience stores, QSRs, parking garages, malls, and more. Many of these are utilizing government funding to do so, but many are also utilizing private investment.

There is a question over what changes to NEVI funding are really in the cards given Elon Musk’s role in the cabinet and given that around 14% of NEVI funding has gone directly to Tesla. Nonetheless, there is talk that the next administration may delay allocating or even redirecting the remaining NEVI funds.  If this indeed becomes reality, it could postpone the installation of chargers and, consequently, the adoption of EVs. This is so much of a concern that the existing administration is moving fast to approve the 3rd round of NEVI funding before the new term starts.

With all that being said, we should not undervalue the impact of private investment. Currently, there are more than 192,000 charging ports accessible to the general public, and every week about 1,000 additional public chargers are introduced. The fact that most of these are privately funded indicates that the BIL has encouraged private investment toward a shared objective and is most likely going to keep doing so even if NEVI allocation changes.

 

3. Tariffs on Imports

The President has authority to impose a range of trade restrictions on foreign nations, including tariff hikes, when responding to an ‘unusual or extraordinary threat’ or as a retaliatory measure, without the support from Congress. The President-Elect has already indicated that he will immediately impose a25% tariff on Canadian and Mexican imports, and an additional 10% on Chinese imports (details are not clear at this time around which products these relate to).

Given the current EV market trends, an increase in tariffs is inevitable. With China having a much lower cost base and excess capacity, EVs are being manufactured there that can be sold at significantly lower than average market value in Western markets, which if made available in the US would impact sales of home-grown EVs. Both Canada and the EU imposed additional tariffs on Chinese EVs in Q4 this year, as did the US in Sept of this year. Even though many analysts believe this was a mistake due to concerns about retaliation from China, the increase is considered a win for these markets as it will allow for more equitable competition for domestic manufacturing.

But it’s not just fully built EVs, China is a significant supplier of raw materials for EVs including batteries and battery components. As the US is still building out production for batteries as well as growing domestic manufacturing, higher tariffs on EV components are bound to increase the cost of the vehicles in the short term, ultimately impacting consumer prices and/or decreased profit margins for the automakers.

All of this could extend the projected price parity date of 2026 by making a cheaper vehicle further off than expected and slowing down adoption by the more cost-conscious early majority in the short term.

 

4. Zero Emissions Policies

New emissions standards were announced in March of this year by the Environmental Protection Agency (EPA) aiming to cut carbon emissions in passenger vehicles by 50% from current levels, by 2032. According to estimates, more than half of all new vehicles sold in the US would need to be Zero Emissions Vehicles (ZEV) in order for automakers to meet these standards. This effectively pushes the market toward EV production and reduction in ICE vehicles on the road.

Coupled with this are the Corporate Average Fuel Economy (CAFÉ) standards, focused on fuel efficiency, that automakers must meet in new vehicles.

Relaxation of CAFÉ standards and/or a roll back of emissions standards could give OEMs space to slow down their EV plans but would not halt the trajectory.  In the short term the price of ICE vehicles may benefit as automakers are not incentivized to invest in technology to improve fuel economy, which in turn could lower the price of ICE vehicles and make EV price parity further away.  But on the flip side, this investment may then be rerouted towards EVs, as global demand still exists. And in fact, many automakers have already pledged to increase EV production over the short to medium term.

We mustn’t forget that California has the authority to set its own standards, which are currently much stricter than those set by the EPA, and 17 other states also have emissions requirements that are linked to California’s. Even if there was a roll-back by the EPA, any attempts by the administration to revoke the authority at a state level to set standards would undoubtedly create lawsuits, and if past litigation by California in this area is anything to go by, this will not reach a quick conclusion.

 

The Bottom Line

The bottom line is that regardless of the unknowns, the level of progress and scale of EV adoption and EV charger rollout has crossed the point of no return. Changes implemented over the next four years could affect pace but won’t affect the overall direction of the EV evolution. Despite the opinions and actions of the administration, businesses are increasingly realizing and acting on their environmental responsibilities coupled with innovation and desire to lead within the tech space, and will continue to do so, spurring the EV market.