How the Trump Administration is Pumping the Brakes on the Electric Vehicle Industry
The electric vehicle industry’s once prosperous and promising future, filled with Biden-era electric vehicle waivers and mandates, now faces barriers from the Trump Administration (Ciara Cook, New Automotive). The most recent blow stemmed from the One Big Beautiful Bill Act (“OBBBA”), which ended deductions offered to taxpayers buying a new electric or hybrid vehicle. Id. This Act, along with Trump’s recent Executive Order, has nudged industries to hedge their investments away from clean energy projects and toward oil and gas technologies, weighing the once promising growth of the electric vehicle industry against the Trump administration’s intent to move away from clean energy. Id. This post explains the clean energy credit, why it was terminated, as well as the effects on the automotive industry and consumers.
The clean vehicle tax deductions were introduced by the Inflation Reduction Act of 2022 (“IRA”). (EPA). The IRA passed during the Biden Administration and introduced incentives for industries to shift toward cleaner energy alternatives, including a tax credit for taxpayers who purchased new clean vehicles in a taxable year. Id. Though the credits were robust, the Internal Revenue Service (“IRS”) had eligibility requirements for both taxpayers and vehicles, explained in a requirements checklist, breaking down requirements for these tax credits. (IRS Checklist). For example, the taxpayer must fall within certain income brackets to qualify, while the taxpayer’s vehicle must be an electric, plug-in hybrid, or fuel cell vehicle under a certain Manufacturer’s Suggested Retail Price (“MSRP”). Id.
This changed when OBBBA became law on July 4th, 2025. (Congress). True to its name, OBBBA is a big bill that handles a large number of sectors, ranging from Supplemental Nutrition Assistance Program (“SNAP”) benefits to coal mining Id. Among many other changes, OBBBA terminated many tax credits, including the IRA’s clean vehicle credits. Id. New vehicles acquired after September 30, 2025, are now ineligible for these credits, whereas vehicles acquired before that date need a written binding contract and a down payment to remain eligible. (IRS FAQ).
Removing these tax credits is not the Trump administration’s first offensive against the electric vehicle industry. (Neil Ford, Reuters). On January 20, 2025, President Trump signed an Executive Order, titled “Unleashing American Energy”, eliminating Biden’s electric vehicle mandate to promote consumer choice. (White House). President Trump cited four main goals in the Order: removing regulatory hurdles to vehicle access, terminating state emissions waivers that limit gas-powered vehicle sales, and eliminating subsidies or other “government-imposed market distortions” to increase electric vehicle sales. Id. This stance against electric vehicle incentives supports the overall posture of the order, emphasizing the need to lower energy costs by pulling focus away from climate-focused energy initiatives and toward oil and gas and critical minerals. Id.
Though the Trump Administration is actively working to promote its vision of “American Energy”, not all states are on board. President Trump doubled down on his Executive Order on June 12, 2025, when he signed resolutions blocking California’s mandates. California Governor Gavin Newsom imposed these mandates to work toward emission reduction requirements. (California Air Resources Board). The mandates also set the goal to phase out the sale of gas-only vehicles by 2035 and promote the adoption of electric vehicles. (David Shepardson, Reuters). California and ten other states filed a lawsuit to challenge these resolutions, with Governor Newsom contending that weakening the electric vehicle industry would ultimately weaken the US’s global competitive edge. Id.
Auto industry leaders have already begun hedging their electric vehicle (“EV”) projects in response to the Executive Order. (Ciara Cook, New Automotive). General Motors, for example, cut over 1,000 factory jobs, with plans to slash battery production, citing new regulations as a driving factor. (David Shepardson & Nora Eckert, Reuters). Additionally, makers like Nissan and Stellantis have followed suit by canceling plans to roll out electric models. Id. With electric vehicle production falling, thousands of blue-collar and white-collar workers are already losing their jobs across Michigan and Ohio. (Associated Press). Some experts predict electric vehicle sales to fall by up to 50% due to the clean vehicle credits being terminated. (David Shepardson & Nora Eckert, Reuters). The United Auto Workers Union has been staunchly advocating for heavier investments in electric vehicle production, but it is uncertain if these slashed jobs will come back.
The oil and gas industry is similarly rearranging its energy investments, with companies like BP shifting focus away from clean energy sources like hydrogen and doubling down on oil and gas. (e2). In the first quarter of 2025 alone, companies withdrew $8 billion worth of investments into clean energy projects. Id. This came alongside thousands of job cuts, predominantly affecting Republican districts such as Vernon, Texas, and Roseville, California. (e2 Project Tracker).
While the Trump administration intended to promote consumer competition and a more equal automotive market by tackling electric vehicle incentives, this approach has stirred up the automotive and sustainability industries. (Ciara Cook, New Automotive). Consumers will feel the effects when they try to purchase an electric vehicle, while auto manufacturers are recalibrating their investments at the cost of cancelled projects and thousands of jobs. Id. While future legislation may echo the Biden administration and ebb toward clean energy incentives, the Trump administration has effectively slowed the US electric vehicle movement in its tracks. Id.