American Auto Giants Lobby Incoming President Trump: The Future of EVs Hangs in the Balance

American Auto Giants Lobby Incoming President Trump: The Future of EVs Hangs in the BalanceA delicate game of political chess is underway, shaping the future of the American automotive industry. Ford, General Motors, and Stellantis, along with other automakers, are cautiously lobbying incoming President Donald J

American Auto Giants Lobby Incoming President Trump: The Future of EVs Hangs in the Balance

A delicate game of political chess is underway, shaping the future of the American automotive industry. Ford, General Motors, and Stellantis, along with other automakers, are cautiously lobbying incoming President Donald J. Trump to refrain from dismantling existing federal regulations designed to boost electric vehicle (EV) sales. This high-stakes negotiation, requiring skillful diplomacy, will significantly impact massive industry investments, global competitiveness, and the U.S.'s commitment to climate change mitigation.

Current EV regulations impose stringent tailpipe emission limits and progressively higher fuel economy standards, incentivizing automakers to ramp up EV production. These regulations, key pillars of President Biden's climate policy, have been fiercely opposed by Trump, who fundamentally disagrees with Biden's approach. He has falsely characterized them as Democrat-mandated policies that infringe upon consumers' freedom to buy gasoline-powered vehicles, a position seemingly aligned with the interests of his oil industry campaign donors. Furthermore, Trump harbors resentment towards some automakers, perceiving their support for Obama-era emissions regulations during his first term as a "betrayal."

However, the reality is that while most automakers weren't entirely supportive of Biden's stringent regulations, they have already invested hundreds of billions of dollars in the EV transition. They fear that a sudden policy reversal by Trump, should he fulfill his promises, could leave them vulnerable to competition from cheaper gasoline-powered vehicles, inflicting potentially devastating blows on the U.S. auto industry a manufacturing mainstay employing roughly 1.1 million workers.

Lobbyists and executives from several automakers have indicated their willingness to negotiate minor adjustments to the Biden-era framework, such as extending compliance deadlines or reducing penalties for non-compliance.

Adding another layer of uncertainty is the presence of Tesla CEO Elon Musk, a senior Trump advisor and controller of nearly half the U.S. EV market. His role in this power play is pivotal.

On November 12th, John Bozzella, president of the Alliance for Automotive Innovation (representing 42 automakers, encompassing almost all U.S. new vehicle brands, including Ford, GM, and Stellantis), sent a letter to Trump urging "stability and predictability" in vehicle emission standards.

Transportation is the largest source of greenhouse gas emissions in the U.S. economy, emissions that are accelerating global warming. While the Obama administration pioneered restrictions on vehicle emissions, Trump repealed these regulations during his first term, replacing them with more lenient standards. The Biden administration, with input from automakers, reinstated and significantly strengthened these emission regulations, making them a cornerstone of the federal government's climate change response. The new rules apply to vehicles produced from 2027 onward, with progressively stricter requirements through 2032. Automakers can meet these standards by selling electric, hybrid, or hydrogen vehicles.

The Environmental Protection Agency estimates that compliance would mean approximately 56% of new passenger cars sold in 2032 will be electric and another 16% hybrid. Currently, EVs and hybrids hold only 9% and 11% market share, respectively. Non-compliant automakers face substantial fines or the need to purchase "emission credits" from those exceeding targets.

Tesla has profited enormously from selling these credits, earning $2.1 billion in the first nine months of this year alone 43% of its net profit. Analysts suggest these credit revenues were crucial in Tesla's early days, potentially preventing bankruptcy.

While EV advocates initially hoped Musk could persuade Trump to retain the regulations, that possibility seems remote. Sources indicate Musk is currently more focused on reducing government oversight of autonomous driving technology, which he considers central to Tesla's future.

Rohan Patel, Tesla's former vice president of global policy who resigned earlier this year, stated that Tesla has prepared for the potential elimination of emission regulations. He said, "If the Republicans win, regardless of Musk's influence, those regulations will certainly be weakened, or likely eliminated."

Musk has also made it clear he won't fight to preserve the $7,500 tax credit for EV buyers in the 2022 Inflation Reduction Act, a subsidy that has been a target of Trump's criticism. On X (formerly Twitter), Musk stated, "My view is we should eliminate all government subsidies, including for EVs, oil, and gas."

While the elimination of the tax credit might impact Tesla, Musk believes it would hurt competitors like Ford and GM more. He stated during a July earnings call, "It's devastating for our competitors, but less so for Tesla."

Analysts point to several reasons supporting Musk's assertion. Firstly, the massive investment made by U.S. automakers in EVs. Data from the Center for Automotive Research (a non-profit organization based in Ann Arbor, Michigan) indicates that Ford, GM, Stellantis, and others invested approximately $146 billion in EV design, engineering, and manufacturing over the past three years. For example, when Trump first took office in 2017, there were fewer than six EV battery plants in the U.S. According to the Alliance for Automotive Innovation, that number is now over 30, many of them joint ventures between automakers and battery companies.

Except for Tesla, most automakers are still selling EVs at a loss, as they haven't recouped their investments. With slowing EV sales growth in the U.S., these companies need scale to reduce production costs.

Nevertheless, nearly all auto executives believe EVs will eventually replace gasoline cars. If U.S. automakers slow their pace, they risk falling behind European and Chinese competitors globally. Analysts warn that repealing emissions regulations could jeopardize these investments and weaken the U.S. industry's global competitiveness.

Stephanie Brinley, an industry analyst at S&P Global Mobility, stated, "Uniform regulations ensure everyone plays by the same rules. You don't want one manufacturer sticking with the cheapest gasoline car they can make for the domestic market while others are trying to make investments to compete globally. If there's going to be regulation, everyone needs to play by the same rules."

Eliminating the regulations also presents significant challenges due to the long lead times for new vehicle development. Detroit's automotive development teams have already designed models slated for 2028 based on the current EV regulations. Brinley cautions, "Regulatory whiplash is much worse for automakers than strict regulations."

Automakers also plan to highlight to Trump that many of their new EV and battery factories are located in Trump-supporting states like Ohio, Tennessee, and Georgia, creating significant employment in these states which voted for Trump in the recent presidential election.

However, automakers need to tread carefully. Their public opposition to Trump's efforts to eliminate Obama-era EV regulations during his previous term might fuel his resentment.

Thomas J. Pyle, president of the American Energy Alliance (a conservative think tank focused on energy issues) and a member of Trump's first transition team, stated, "Given the history between these companies and Trump, Im not sure how much influence the auto industry will have on his decision."

Trump's strongest resentment toward automakers stems from a 2019 agreement in which four global automakers (Ford, Volkswagen, Honda, and BMW) secretly agreed with California to reduce tailpipe emissions according to California's stringent limits. This caught Trump off guard and enraged him, as he was attempting to loosen federal emission standards and revoke California's authority to set its own rules. Trump seemingly sought retribution, launching antitrust investigations against the companies involved. Stellantis and Volvo later joined the California agreement, and these companies remain bound by it.

In contrast, Mary Barra, CEO of General Motors, has demonstrated remarkable flexibility in navigating White House policy shifts. In the weeks leading up to Trumps previous inauguration, Barra met with Trump, urging him to relax emissions standards and supporting the Trump administrations legal challenge to the California agreement. However, shortly after Biden's election victory in 2020, Barra swiftly reversed course, abandoning support for the Trump administration's California case and publicly endorsing Biden's EV plans. In a letter to environmental groups, she stated, "President-elect Biden has recently said, I believe that by shifting towards electric vehicles, we can recapture...' " (The quote seems to be incomplete in the original text).