Auto lobbying group CEO expects Trump will reevaluate EV battery manufacturing credits
Detroit -- The CEO of the nation's top automotive lobbying group said Wednesday he expects the Trump administration will reevaluate the circumstances that led to the creation of a tax credit for manufacturers of electric vehicle batteries, an incentive that automakers say is critical for U.S. EV investment.
"It's a new administration and a new Congress," John Bozzella, CEO of the Alliance for Automotive Innovation, told The Detroit News at the Detroit Auto Show. "I think there will be a reassessment of how much risk there is. My job is to deal with risks, so I want to make sure that we make a compelling argument about how important a competitive industry is to our national and economic security, and how supporting the industrial base and its shift to cutting-edge technology is important."
President Joe Biden in 2022 signed the Inflation Reduction Act that included subsidies for the production of EV batteries in the United States, which the industry celebrated as a major step toward leveling the playing field with battery-production leader China. Executives announcing new U.S. EV projects representing billions of dollars and thousands of new jobs have said the legislation is significant contributor to making those investments happen.
But, decrying an "EV mandate," President-elect Donald Trump has expressed a desire to roll back the Biden administration's incentives, including the up to $7,500 tax credit on plug-in vehicles. Automakers like Ford Motor Co. are urging the incoming administration to reconsider.
"The production credit is critical for our industry, and it will be a significant impact for our industry if it goes away," Ford CEO Jim Farley said last week. "Many of our plants in the Midwest that have converted to EVs depend on the production credit. We would have built those factories in other places, but we didn't."
Battery cells, which store and release energy needed to power EVs and are the most expensive part of EVs, are each eligible for a credit of $35-per kilowatt-hour of energy they can store under the legislation. Storage ranges from 60 kWh in smaller EVs like the Chevrolet Bolt EV to more than 200 kWh in the GMC Hummer EV, according to auto information website Edmunds.com Inc. Critical mineral miners, processors, purifiers and recyclers can claim a credit equal to 10% of their production costs too.
Bozzella said the United States is behind China 10 to 15 years with respect to electrification. Policy to shift that industrialization, he said, is important from a secure supply-chain perspective, which he feels both Democrats and Republicans understand.
Bozzella himself hasn't spoken with Trump directly, though he did send a letter to him emphasizing the importance of keeping the domestic auto industry competitive globally. Another "car guy," however, does have the incoming president's ear: Tesla Inc. CEO Elon Musk. Auto Innovators represents all major U.S. automakers except for Tesla.
"You can't have too many car people talking to the president of the United States," Bozzella said. "I love the idea that there are car people talking to the president of the United States. What it means with regard to specific policies, we'll have to see. But again, it's recognition of the strategic importance of the auto industry in the U.S. to our economy."
Mike Stanton, president of the National Automobile Dealers Association, told The News at the auto show with respect to Musk, whose Tesla sells directly to consumers and not franchise dealers, he is doubtful the relationship will yield a competitive leadership position.
But Stanton expressed concerns that the end of the consumer tax credit could cut EV sales in half or more. Speaking with federal agency transition teams, he said there's no appetite for continuing the credit. NADA at least is pushing for a ramp-down of the credits, especially if the administration rolls back greenhouse gas tailpipe emission and fuel economy regulations.
"If the EV mandates go away, we're no longer chasing a government made-up target," Stanton said, "but we've got all of these vehicles on our lot, like 200,000 vehicles, $7 billion worth of inventory, and all of a sudden they became $7,500 more expensive to sell.
"We need time to work out of the inventory that we have, time to work with our manufacturers, maybe to adjust programs, pricing so that we don't make everything effectively $7,500 more expensive right away."
Automakers are unlikely to make up the difference, as many sell EVs at a loss without sufficient scale volumes: "They would just lose more money," Stanton said.
Elaine Borseth, president of the nonprofit education advocate Electric Vehicle Association, said a ramp-down would offer greater access for consumers concerned about vehicle cost.
"It has helped people get into affordable EVs," Borseth said of the tax credit. "If we're gonna make it equitable, that needs to be in place right now."
On carbon regulations, Bozzella said the standards for model years 2027 to 2032 set under Biden are "incredibly aggressive" and could use another look. The vehicle market, including for EVs, has changed since a few years ago when inventories were affected by pandemic-induced shutdowns and a global microchip shortage. Consumers remain hesitant over affordability, range, charging station access, speed of charging and electric grid reliability. Although EVs continue to sell, their adoption rate isn't increasing at the rate it once had been or was expected to grow.
"We can't have regulations that push the industry too far ahead of the customer," Bozzella said. "The customer is in charge."
Katherine Garcia, director of the Sierra Club's "Clean Transportation for All" campaign, said during a panel at the auto show that the current national standards are reachable.
"We would argue that they are feasible," she said. "You can meet the threshold with plug-in hybrids, and many manufacturers are producing more plug-in hybrids to get the consumers more interested and excited about the technology."
California's standards, however, are "clearly unachievable," Bozzella said. They require EVs to make up 100% of new light-duty vehicle sales by 2035. Eleven other states and the District of Columbia -- collectively accounting for about one-third of the U.S. population -- have pledged to copy the Golden State's latest standards. California and environmental groups, however, say the rules are reasonable, that automakers were involved in their creation and that the companies have complied with previously passed standards, which allow for the purchase of credits from competitors.
California gained authority to sets its own provisions thanks to a provision in the Clean Air Act, originally passed in 1970. The incoming administration, however, likely will challenge California's authority in court, as it did during Trump's first term. The U.S. Supreme Court could also strike down California's waiver authority through a case it has repeatedly relisted on its docket but has not yet formally considered.
"In an ideal world, we would have one national program. We're the only country in the entire world that has a multiplicity of standards," Bozzella said. "This makes no sense. We should have one national program."
At one point, Trump threatened a 25% tariff on all goods from Canada and Mexico, two key trading partners of automobiles and their parts, as leverage in border security negotiations. Bozzella suggested it's too early to react to what could happen there, but emphasized levies can be a valuable tool in addressing anti-competitive behavior like dumping subsidized products into the United States.
The automobile dealers association hasn't taken a position on tariffs on Mexico or Canada, but Stanton said national security, customer privacy and impact on domestic companies and jobs make the organization supportive of keeping Chinese competitors out of the United States.
"We've got state franchise laws which are difficult for them to navigate," Stanton said. "I've heard they're not ready. I don't think it's imminent."
Protecting and leveraging those franchise laws is a priority for NADA in 2025. Mostly on a state-by-state basis, the organization is advocating for dealer protections after decisions to pursue direct sales by Volkswagen AG-backed Scout Motors, Honda Motor Co. Ltd. and Sony Group Corp. joint venture Afeela, and Tesla.
"Everybody should play by the same set of rules, and dealers compete for consumer business," Stanton said. "If you don't like the way I treat you, you go to the dealer in the next town. You don't have monopolized pricing. Consumers will have the opportunity to shop, not just on on sales, but in the service area as well."