Electric Vehicle Adoption is Stumbling, But Still Growing Amid Geopolitical Clashes
President Donald Trump, in his initial executive orders, declared an intent to eliminate the “electric vehicle (EV) mandate” and foster “true consumer choice.” His administration aimed to achieve this by ending regulations and subsidies, which he argued made EVs artificially affordable compared to gasoline-powered vehicles. This policy shift could hinder efforts to decarbonize cars and trucks, vital for achieving net-zero emissions goals. The transportation sector accounts for approximately 12% of global and 22% of U.S. climate pollution.
Electric vehicles have emerged as a climate-friendly alternative, producing significantly lower emissions due to their high efficiency. As power grids transition to cleaner sources like solar and wind, the environmental benefits of EVs will only amplify.
Global EV sales have increased significantly as prices have declined. Governments have also implemented incentive programs to encourage EV adoption. In 2019, approximately 2 million EVs and plug-in hybrids were sold worldwide, accounting for only 2.5% of the global new car market. By 2024, the number skyrocketed to over 17 million vehicles, representing more than one in five new passenger cars sold.
However, last year’s EV sales growth varied considerably. China drove much of this growth, with 11 million EVs and plug-in hybrids sold, a 40% increase year-over-year and almost two-thirds of the worldwide total. Europe followed, with 3 million EVs sold, or 18% of new EV sales; however, sales there decreased by 3% due to expiring government incentives. North America accounted for 1.8 million, just over 10% of global sales, with only a modest 9% increase in 2024. The rest of the world saw rapid EV sales growth, reaching 1.3 million, a 27% increase over 2023.
The International Council on Clean Transportation forecasts that global climate pollution from road transportation will peak this year, followed by a decline largely attributed to the adoption of EVs. However, the political climate in countries like the U.S. remains a potential obstacle.
The Trump Effect on U.S. EV Sales
The Trump administration’s stance targets both regulations and government incentives designed to encourage EV adoption.
Relevant regulations include the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy (CAFE) standards, which mandate that automakers’ average vehicle sales meet a defined fuel efficiency level. Sean Duffy, immediately after his Senate confirmation as the new Secretary of Transportation, signed an order to review and reconsider all CAFE standards.
The Environmental Protection Agency (EPA) also issued stringent average vehicle tailpipe emissions standards last March. Since EVs produce no tailpipe emissions, automakers can most readily fulfill these standards by boosting EV sales. The agency’s new administrator, Lee Zeldin, will likely order a review and revision of these rules.
The Republican-led House of Representatives voted last year to repeal this rule and prevent the EPA from imposing future vehicle pollution regulations, although the Senate didn’t take up the bill.
The EPA also granted California two waivers in December, allowing the state to set more stringent vehicle pollution standards and require a growing share of in-state new passenger vehicle sales to be EVs and plug-in hybrids, reaching 100% by 2035. Thirteen states, along with Washington D.C., which, coupled with California, account for over one-in-five new U.S. passenger car sales, have adopted California’s EV mandate.
The previously mentioned executive order aimed to “terminat[e], where appropriate, state emissions waivers that function to limit sales of gasoline-powered automobiles.” During the prior Trump administration, the EPA revoked California’s waiver in 2019, leading to a lawsuit from California. The Biden EPA reinstated the waiver in 2021 before the legal proceedings concluded. According to the California Air Resources Board, “The Clean Air Act does not allow waivers to be revoked.”
A noteworthy development is that many automakers don’t sell enough EVs to comply with regulations and thus have to purchase credits from companies with excess EV sales, such as Tesla. E&E News reported that nearly one-third of Tesla’s profits over the past decade came from selling emission compliance credits. Tesla had previously lobbied to preserve California’s programs. The company’s chief executive, Elon Musk, plays a significant role in the Trump administration, including efforts to freeze federal funds and dismiss federal workers.
The Inflation Reduction Act also introduced federal EV subsidies up to $7,500. While the executive order and Musk have advocated for eliminating these subsidies, only Congress can modify the tax code. These credits can also be transferred to participating auto dealers, enabling them to immediately lower the sales price—a process that, as of early February, continues despite federal funding freezes.
Many Republican members of Congress have called for the elimination of the EV tax credits. Nevertheless, their “made-in-America” requirements have prompted significant investments, totaling hundreds of billions of dollars, in domestic battery and EV manufacturing supply chains, primarily in Republican-represented districts in the South and Midwest. One recent study estimated that removing these tax credits would decrease U.S. EV sales by approximately 20% between now and 2035, potentially endangering numerous jobs and local tax revenue generated by these manufacturing facilities.
Regardless of the outcomes of EV regulations and policies, experts predict a continued rise in the EV share of new U.S. passenger car sales. Following rapid growth from 2020 to 2023, sales slowed in 2024 as more Americans chose traditional hybrids. Cox Automotive projects that the EV and plug-in hybrid share of new American car sales will increase modestly from 9% in 2024 to 10% in 2025, with standard hybrids accounting for an additional 15% of the market.
Tesla’s Decline and China’s Ascendancy
Tesla’s vehicle sales decreased last year for the first time since 2011. However, the company still represented 48% of new U.S. EV sales in 2024, a decrease from 55% in 2023 and 64% in 2022. Some of this decline may be attributed to Elon Musk’s contentious behavior.
According to a survey by Electrifying.com, nearly 60% of current and prospective EV owners reported that Musk’s controversial reputation actively discourages them from purchasing a Tesla. Similar reactions to Musk and Tesla appear in recent European EV sales numbers.
Tesla has long been the worldwide leader in fully electric car sales. However, Chinese automaker BYD is on the verge of surpassing Tesla. BYD also sells nearly as many plug-in hybrids as fully electric cars, whereas Tesla only sells fully electric vehicles.
Chinese EVs have been kept out of the U.S. auto market due partly to a 100% tariff. But half of the new passenger car sales within China are now electric; their EV exports to other countries are also on the rise.
The Factors that Will Determine How Fast EV Adoption Proceeds
Studies from 2021 and 2023 identified inadequate public charging infrastructure as a significant barrier to broader EV adoption. This infrastructure has been growing rapidly in the U.S., but the Trump administration is attempting to freeze funding for the National Electric Vehicle Infrastructure Program, which received $5 billion in the 2021 bipartisan infrastructure bill. The legality of this move is questionable and may be decided in the courts.
These studies also identified cost as a major barrier to EV adoption. This conclusion is supported by developments in China, where two-thirds of EVs are now cheaper than their internal combustion engine equivalents, and EV sales are surging. A 2022 paper from Energy Innovation found that in the U.S., although EV sticker prices remain somewhat high, “in most states, financing and owning an EV is cheaper on a monthly basis than financing and owning an equivalent gasoline car.” This trend is aided by the fact that, as a AAA analysis revealed, fuel and maintenance costs for EVs are around $1,000 per year lower than those for gasoline-fueled vehicles.
Many automakers plan to introduce more affordable EV models in the near future. But if Congress repeals the EV tax credits, it could slow their adoption in the U.S., potentially allowing China to gain further dominance in this critical clean technology market.
