Allow me to let you in on a crazy little secret about the United States: We’re actually doing very well on the auto industry’s ongoing electric vehicle transition. Yes, really.
Last year, about one in 12 new cars sold were fully electric. This country produced the longtime global leader and still nationwide leader in EV sales, Tesla, which is also the company that sparked the modern electric revolution. We have at least two other promising EV startups now too. And General Motors sold more than 100,000 EVs for the first time, while Ford kept its no. 3 best-selling EV model spot behind Tesla.
New or revamped car factories are underway in about a dozen states to make those cars, and the country is seeing a “battery boom” to make their power units here. And those batteries will be needed for hybrid cars, too, which are assuredly having a moment (and probably will for some time.)
Sure, China is very far ahead in the race. But when you compare the U.S. to Europe, where the EV revolution is hitting a serious wall; Japan, which has barely started down this road; or even South Korea, which makes phenomenal EVs but is inherently limited by its size and relies heavily on expansion and exports; then yeah, America’s doing all right.
This is to say that while President Donald Trump campaigned heavily on anti-EV rhetoric and signed an executive order to cancel his predecessor’s not-a-mandate-EV-mandate, it will take much more than the stroke of a pen to walk all of that back. And now the auto industry is pushing back as well.
That kicks off this midweek edition of Critical Materials, our morning roundup of tech and mobility news. Also on deck: deeper looks at what’s next for Europe and China this year.
30%: Trump’s Anti-EV Plans May Be Harder To Execute Than He Thought
2022 GMC Hummer EV Edition 1 pickup on the Factory ZERO assembly line
I can’t say which automaker this applies to. But I heard an anecdote last year about one dealership magnate grousing to a car company executive about having to sell EVs, and then being hopeful that “Trump [was] gonna come in and make this all go away for us.”
But even just two days into the new Trump administration and that goal is proving more complicated than it was sold on the campaign trail.
Basically, changes to the EV tax credit and other provisions of the Inflation Reduction Act have to go through Congress; EPA regulations on emissions driving EV growth must go through a rule-setting process that can take years; California and eight other states are still set to ban new gas-powered car sales in 10 years; and now the lobbyists are getting involved.
The Alliance for Automotive Innovation has pushed to continue the tax credit and other support, arguing that US automakers seeking to build and sell EVs need the help to compete with Chinese automakers who make far more vehicles than any other country, thanks to China’s focus on EV sales.
The United States “is no longer the largest auto producing country,” said a letter from the industry trade group. “China’s strategic focus on EVs has propelled it to global leadership.” While the letter was sent to Congress last October, the position of the trade group has not changed since the election.
And the legacy automakers don’t want to walk away from EVs, even if they’re losing money on the endeavor right now. They forecast that as their EV sales increase, they will swing from losses to profits just as Tesla did as it was scaling up its EV production. And with fewer moving parts, it can be more profitable to build an EV than a gasoline-powered car with its complex engine and transmission.
Tesla’s profit margin on its cars, for instance, was about 16% during the first three quarters of 2024. That’s nearly twice the profit margin at General Motors.
And then there’s the fact that if you’re a car company running a capital-intensive business that’s defined heavily by regulations of all kinds, you have no choice but to play the long game. Trump is pushing a near-total 180-degree flip of the Biden policies that put the U.S. in this moment; the car business cannot, and does not seem inclined to, hit reverse every four to eight years.
American hunger for electric vehicles isn’t just growing—it’s growing faster than demand for petroleum-powered cars. Dozens of EVs are wending their way through product pipelines that take years to navigate, often far longer than a single presidential term. And legacy automakers have already sunk $33 billion into factories that will only build electric cars, plus another $90 billion in American battery factories—many of which are in southern states that voted for Trump.
“We might see a much slower adoption of EVs (with a regulation change),” said Jeff Schuster, global head of automotive at GlobalData, an industry consultant. “But with all the investment, we’re not likely to see it reversed.
Things can always change. But as CNBC noted today, even U.S. House Speaker Mike Johnson said in an interview last fall:
It would be impossible to “blow up” the IRA, and it would be unwise, since some aspects of the “terrible” legislation had helped the economy. “You’ve got to use a scalpel and not a sledgehammer, because there’s a few provisions in there that have helped overall,” Johnson said.
That’s the thing about campaign promises: they’re always easier said than done.
60%: But Europe Has Its Own Problems
Euro-spec 2024 Volkswagen ID.5 exterior
This doesn’t get enough attention, but here’s one of the biggest things the auto industry operating in America has going for it: it’s still a growing one. Growth is never unlimited, of course, but the U.S. just had its best year for new car sales since 2019. Not bad, considering how high interest rates have been.
But the European new car market, gas-powered or electric or otherwise, is stagnating. Their inflation is worse than America’s, energy costs are high and pulling EV subsidies is hammering electric demand. This leaves a lot of players to fight over increasingly small scraps, especially with the Chinese automakers coming in too.
And as Bloomberg points out today, they have potential new tariffs to deal with from Trump. (Sorry, friends.) From that story:
New-car registrations in the region edged up 0.9% to 13 million units from a year earlier after a bounce in December, the European Automobile Manufacturers’ Association, or ACEA, said Tuesday. Sales of fully electric vehicles fell 1.3% after countries including Germany ended subsidies, dragging their share of the total market down to 15%.
Europe’s automakers are braced for another tough year in 2025, with stricter European Union emissions targets forcing them to sell more EVs despite the drop in demand. Having suffered from falling sales in China, the world’s largest car market, they now also face the threat of additional tariffs in the US under President Donald Trump.
New-car sales in Europe could fall in the first six months of 2025, according to analysts at Bloomberg Intelligence. But they predict price cuts in the second half of the year could lift them slightly.
Add to the mix a very contentious election in Germany coming up and we can all expect a rocky year ahead for the entire continent.
90%: China In 2025: A Year Of Consolidation?
And as we’ve reported before, China’s auto industry may be significantly ahead on EV tech, batteries and even software, but it’s far from invincible. It’s filled with countless auto brands making EVs and hybrids, but only to varying degrees of success and profits. Sales have been slowing and those car brands are sure to consolidate or even fold at some point—just as happened in America over the decades as well.
Here’s CNBC on the year ahead in China:
But looking ahead, HSBC analysts forecast only a 20% increase in China’s new energy vehicle sales this year, alongside heightened industry consolidation. They predict BYD unit sales growth of around 14%.
Strong sales volumes have enabled “strugglers and stragglers” to hang on despite falling margins, Yuqian Ding, head of China autos research at HSBC, said in a report last week. She pointed out that only BYD, Tesla and Li Auto made a profit in 2023.
“In our view, this situation is unsustainable and we expect the pace of industry consolidation to accelerate rapidly,” Ding said.
“A lot of customers, the automakers, they’re not in a good financial state. They cut the R&D budget. That will definitely have a negative impact on this industry,” [Appotronics Chairman and CEO Li Yi] said, also noting overcapacity issues.
Real talk: the big power-hitters like BYD, Li Auto, the Geely Group (Volvo, Polestar, Lotus, Zeekr and so on) and probably Xpeng and Nio (among a few others) will likely be fine long-term. But China’s been entering a “survival of the fittest” environment for some time and that trend is only likely to accelerate here.
And if China’s EV and PHEV growth stalls, it could give other players a chance to catch up.
100%: How Does Trump ‘Win’ On EVs?
Photo by: Chevrolet
Chevrolet Equinox EV and Donald Trump
Congratulations! Due to your prolific commenting on InsideEVs, you have been appointed the czar of President Trump’s Don’t Make American Cars Technologically Irrelevant But Also Make The Boss Look Good Task Force. I’m very proud of you. (A meme coin is expected to be launched shortly.)
Your job is to craft policies that make it look like Trump is delivering on his many promises about saving the car industry. But! These policies also cannot kill the planned jobs driven by the IRA, or turn America’s car companies into the next John Deere because they only know how to make gas-powered pickup trucks.
What’s your master plan? Drop it into the comments below for public review.
Contact the author: patrick.george@insideevs.com
