If President Trump has his way, the auto industry's transition to electric cars will soon be reversed. It would eliminate tax credits for buying electric cars, federal grants for chargers, subsidies and loans to help rebuild assembly lines and build battery factories.
Mr. Trump's Inauguration Day orders amount to a broad rejection of the centerpiece of former President Joseph R. Biden's multibillion-dollar program to combat climate change, which Republicans presented as a campaign to ban gasoline-powered cars.
The orders also spell trouble for automakers investing billions of dollars in electric vehicles, as the Biden administration encourages them. But some orders appear to have bypassed Congressional or federal rulemaking procedures, which could expose them to lawsuits and even opposition from within the Republican Party.
The orders, framed as a way to revive the American auto industry, could leave U.S. automakers lagging behind if they scale back their electric vehicle programs while Asian and European automakers continue to improve the technology, analysts said. Already 50 percent of car sales in China are electric or plug-in hybrids, and Chinese automakers like BYD are selling more cars around the world, drawing customers away from established automakers, including American manufacturers.
The executive order, titled “Releasing American Energy,” signed by the president on Monday, directs federal agencies to immediately stop paying funds appropriated by Congress as part of Biden's efforts to steer the auto industry toward zero-emissions vehicles. Among other things, the funds helped states install fast chargers along major highways.
Mr. Biden's flagship climate law, the Inflation Reduction Act, also introduced tax credits of up to $7,500 for buyers of new electric vehicles and up to $4,000 for buyers of used models. The credits effectively put the cost of buying some electric cars on par with gasoline or diesel cars.
Mr. Trump also scrapped an ambitious Biden executive order that would have required 50 percent of new cars sold by 2030 to be fully electric, plug-in hybrids or hydrogen fuel cell vehicles.
And Mr. Trump said the administration would seek to revoke California's authority to set air quality standards that are stricter than federal regulations. This would have far-reaching implications. California aims to make 100 percent of new car sales electric by 2035, and some of its standards are being copied by at least 17 other states.
“The impact is going to be significant,” said Shay Natarajan, a partner at Mobility Impact Partners, a private equity firm that invests in sustainable transportation.
He noted that if demand for electric vehicles cuts incentives, as in other countries such as Germany, automakers could be left with expensive, underutilized electric cars and battery factories.
“Federal funding for electric vehicle and battery manufacturing will become more difficult to obtain and will increase the risk of tied-up capital for manufacturing projects already underway,” Ms. Natarajan said in an email.
While representatives of the fossil fuel industry celebrated the president's move, environmentalists lamented what they say is a serious setback in efforts to reduce greenhouse gas emissions and reduce urban air pollution caused by automobiles.
“This is a new day for American energy,” said Mike Sommers, president of the American Petroleum Institute, “and we applaud President Trump for moving quickly to chart a new path where U.S. oil and natural gas are accepted, unfettered.”
Katherine García, a transportation expert at the Sierra Club, said, “Refunding vehicle emissions caps hurts our health, our wallets, and our climate. We will fight him at every turn of the road.”
But the ultimate effect may not be as far-reaching as the tough language in Mr. Trump's executive order suggests.
Funds to promote the sale and production of electric vehicles are enshrined in legislation that the president cannot unilaterally rescind. Mr. Trump also cannot overturn rules set by the Treasury Department and other government agencies to determine how the money will be distributed with the stroke of a pen. Any attempt to short-circuit the laborious process of proposing new regulations, including seeking public comments, would almost certainly lead to legal challenges.
The Energy Department has agreed to lend billions to automakers like Rivian, which will buy $6 billion for a factory near Atlanta to make electric sports cars. The loan agreements, some of which were finalized in the waning days of the Biden administration, are binding contracts.
Most of the money went to congressional districts in states like Georgia, Ohio, South Carolina and Tennessee, where Republicans dominate local politics. Their representatives can avoid repealing laws that bring jobs and investment to their districts. That's a problem for Republican leaders fighting for slim majorities in the House and Senate.
Ultimately, individuals and families will decide which cars to buy. Electric cars and plug-in hybrids are gaining market share not only because of subsidies, but also because they offer quick acceleration and low fuel costs. Fossil-fueled vehicles are losing share, although that could change if financial incentives are removed from battery-powered cars and trucks.
A sharp change in political direction creates a difficult situation for car manufacturers. Some may welcome the president's promises to roll back emissions and air quality standards that force manufacturers to sell more electric cars than they want. But eliminating federal subsidies could disrupt their financial planning as most struggle to make or increase profits.
Electric vehicle policies add to an environment of heightened uncertainty and danger, with the president's promise to impose 25 percent tariffs on goods from Canada and Mexico, a major supplier of cars and auto parts to the United States.
Carl Weinberg, chief economist at High Frequency Economics, said in a note to clients Tuesday that the U.S. auto industry “will be torn apart by tariffs on cars or parts assembled at this level.”
Some automakers applauded the president's actions, while others were noncommittal.
“President Trump's clear focus on policies that support a strong and competitive manufacturing base in the United States is very positive,” said Stellantis, which owns Dodge, Jeep, Ram, Chrysler and other brands.
General Motors Chief Executive Mary T. Barra congratulated Mr. Trump on his X on Monday, saying the company “looks forward to working together on our shared goal of a strong U.S. auto industry.”
There is no sign that Elon Musk, Tesla's chief executive and the head of Mr. Trump's Department of Government Efficiency, is using his influence to stop the attack on electric cars. Tesla accounts for just under half of all electric vehicles sold in the United States, and nearly all of its vehicles qualify for a $7,500 tax credit.
Four of the 16 cars and trucks that can be purchased with the help of that tax break are made by Tesla. GM is the only automaker with five more compatible models. No other company has more than two eligible cars.
Mr Musk has previously said the government should get rid of all subsidies and that Tesla would suffer less than other carmakers. But analysts note that Tesla's sales and profits will be hit hard if Mr. Trump successfully repeals or cuts the electric car tax credit, California's clean air exemption and other such policies.
Tesla did not respond to a request for comment.
Speaking to Trump supporters in Washington on Monday, Mr. Musk, who is also the chief executive of SpaceX, cheered the president's promise to send astronauts to Mars. “Can you imagine how awesome it will be when astronauts plant a flag on another planet for the first time?” Mr. Musk said. He did not mention cars.