Four years ago, General Motors became the first of the world’s biggest carmakers to set a 2035 target to stop selling passenger vehicles powered by the internal combustion engine.
Since then, sales of electric vehicles have grown steadily even in the US, which has lagged far behind China and Europe in the transition away from petrol. In September, the share of EV sales in the new car market hit a record 11.7 per cent, according to Cox Automotive.
But that growth is now sharply slowing as President Donald Trump rewrites US climate policy.
“In the near term, I believe EV adoption will now only be about 5 per cent of the US market,” Ford chief executive Jim Farley told analysts at its recent earnings presentation. Its sales of EVs in October plummeted 25 per cent compared with a year earlier.
Trump has vowed to kill the US’s three parallel systems of emissions credits, in the name of lower car prices — including one scheme run by the Environmental Protection Agency for greenhouse gas emissions and a second in the state of California based on EV and hybrid car sales.
His “big, beautiful bill” targets a third system, the federal “corporate average fuel economy” (Cafe) standards. The programme penalises automakers whose vehicles fall short of fuel-efficiency targets and rewards those that produce no emissions with clean air credits, which can then be sold on to petrol-focused rivals to offset their fines.
The popular $7,500 EV tax incentive also came to an end in September, which triggered a rush to buy battery-powered models that doubled GM’s EV sales to a quarterly record of 66,501.
The US policy shift has forced GM to book a $1.6bn charge to scale back its EV production while it also announced the termination of its electric van production in Canada. “We are not abandoning EVs by any sense,” its chief financial officer Paul Jacobson stressed at a JPMorgan conference in mid-September.
Trump’s changes risk putting the US far behind China, where EVs are expected to outsell petrol cars on an annual basis for the first time this year.
EV sales are now expected to account for 27 per cent of new car sales in the US 2030, according to energy research provider BloombergNEF, compared with its previous forecast of 40 per cent. That compares with an estimated 80 per cent in China and 52 per cent in Europe.
“The US now lags China and Europe even more, but also other smaller car markets which previously haven’t really been top tier markets for EV adoption [such as] Australia and South Korea,” says Aleksandra O’Donovan, head of electrified transport at BloombergNEF.
But the US president has argued that EVs, which are more expensive to make than their petrol counterparts because of battery costs, would lead to “complete obliteration” for the US car industry and higher vehicle prices for consumers.
The internal combustion engine is an area in which US carmakers excel compared with their Chinese rivals, which so far have been shut out of the American market.
“The US response is a geopolitical one. China is the most advanced country on clean technologies, while the US is lagging,” says Vittoria Ferraris, managing director at S&P Global Ratings.
The regulatory changes also come as the global automotive industry is dealing with higher tariffs that the Trump administration has imposed on imported cars.
With a clear policy direction from Trump, carmakers reacted quickly to boost production in the US but specifically for petrol and hybrid versions of higher-margin sport utility vehicles and pick-up trucks.
Stellantis, owner of brands including Jeep and Peugeot, recently pledged to invest a record $13bn in the US over the next four years, while GM is investing $900mn in its New York propulsion plant to build a cleaner V8 engine.
Meanwhile, EV-related investments, which span batteries, vehicle assembly and charging equipment, have already tumbled by almost a third to $8.1bn in the three months to September compared with a year earlier, according to US Clean Investment Monitor, a database created by Rhodium Group and the Massachusetts Institute of Technology.
Some carmakers, however, have argued that the removal of regulatory pressure and EV credits in the US would create a healthier environment for companies to compete with good quality and more affordable battery-powered cars.
“In the immediate term, the lack of incentives will slow sales, but the EV market needs to ultimately thrive without incentives,” says Stephanie Brinley, principal automotive analyst at S&P Global Mobility.
In August, Ford announced plans to invest $2bn to build more affordable EVs, starting with a pick-up truck in 2027 that will cost about $30,000.
Håkan Samuelsson, the chief executive of Volvo Cars, says EV subsidies were not long-term solutions for advancing the electric transition in the US.
“It will only grow if there are good electric cars that consumers want to buy and they are affordable,” Samuelsson says. “We are very close to a future where an electric car is priced on the same level as a normal car.”