How Republican EV cuts could put US carmakers behind China – ET Auto

President Donald Trump has said his policies will revive auto manufacturing in the US. But Republican attacks on electric vehicles could do just the opposite, some industry experts say, by surrendering leadership in an emerging technology.

China already has a formidable head start in electric vehicles and the batteries and minerals needed to produce them. Companies such as BYD, SAIC and Geely produced 70% of the electric cars sold globally in 2024, according to the International Energy Agency. Automakers in the United States produced just 5%.

Tesla is the only American company that ranks among the world’s 10 largest electric vehicle makers. General Motors and Ford Motor are minor players. Even Tesla, which made electric cars mainstream and held the No. 1 spot for several years, has been overtaken by BYD and Geely, according to SNE Research, a South Korean research firm.

The more electric vehicles that Chinese companies make, the more difficult it will be for US carmakers to catch up. The Chinese companies can spread the costs of developing new technology across more vehicles. They can buy parts at more favorable prices and reap other benefits of the economies of scale that are crucial to success in the auto industry.

One in five new cars sold worldwide is electric, and the percentage is increasing. That is one of the reasons that US automakers have steadily lost ground in Asia, Europe and Latin America in recent years. Many consumers in those countries are instead buying cars from Chinese companies that offer a wide array of affordable electric and hybrid vehicles.

GM and Ford now earn a large majority of their profits in the United States. Analysts say their sales in the rest of the world could be reduced to rounding errors in the coming years based on current trends.

“The United States needs to decide if they want an auto industry that can compete globally,” said Greg Dotson, an associate professor at the University of Oregon School of Law and former Democratic chief counsel for the Senate Committee on Environment and Public Works. “It’s just clear that’s the way the world is moving.”

The budget and policy bill passed by the Senate Tuesday would slash Biden-era measures designed to give GM, Ford and other domestic manufacturers a fighting chance of surviving Chinese competition.

The bill eliminates tax credits of up to $7,500 for electric vehicle buyers, claws back money for fast chargers and phases out subsidies for companies that set up battery factories and lithium mines.

Killing those programs would endanger more than $200 billion that auto companies, battery makers, mining companies and others have invested to create a US electric vehicle supply chain not dependent on China, according to data compiled by Jay Turner, a professor of environmental studies at Wellesley College, and his students.

“The government doesn’t seem to be interested in the competitiveness of the auto industry,” said Jody Freeman, director of the Environmental and Energy Law Program at Harvard Law School. “Who’s going to buy our cars?”

Already some manufacturing projects have slowed. AESC, a Chinese-owned battery maker, has paused construction of a factory in South Carolina that was expected to supply BMW and other carmakers. The delay will make it harder for electric vehicle makers to buy batteries made by American workers. Just two Chinese companies, CATL and BYD, account for more than half of global battery production, and China is the main source of battery materials such as refined graphite and lithium.

Republicans argue that Democratic efforts to subsidize electric vehicles mainly helped affluent car buyers. They also argue the cars are inferior to gasoline models. It’s true that US electric vehicle sales have been modest compared with sales elsewhere. Including Canada and Mexico, they grew 3% this year through May, compared with the same period in 2024, according to Rho Motion, a research firm. Growth was 33% in China and 27% in Europe.

“No president has taken a greater interest in restoring the dominance of the American auto industry than President Trump,” Kush Desai, a White House spokesperson, said in an email. “Instead of doling out inefficient subsidies, the Trump administration is deploying a multifaceted approach of rapid deregulation, tariffs and other pro-growth policies.”

Electric vehicles remain more expensive than gas and hybrid cars in the United States. Despite improvements, the fast charging network remains spotty. China has a much denser charging network, and many electric vehicles cost less than comparable gasoline-powered cars because of intense competition and more efficient manufacturing.

But auto executives are nearly unanimous that, even in the United States, electric and hybrid vehicles will eventually displace gasoline-powered vehicles. Sales of cars that run solely on fossil fuels have been declining for a decade, accounting for less than 74% of the US market in the first quarter of this year, according to the Alliance for Automotive Innovation, the main lobbying group for most major carmakers.

Consumers are increasingly choosing hybrids, which have electric motors and gasoline engines, or pure electric vehicles. In hybrid technology, US automakers are behind the Japanese automakers Toyota and Honda. Many auto experts believe that prices for fully electric vehicles will fall as the technology improves and that, within a few years, they will be cheaper than cars that run on gasoline.

The Alliance for Automotive Innovation, in a June report, stressed the need to strengthen US EV manufacturing to stay competitive globally. However, environmental groups argue the industry has not done enough to defend EV incentives, despite supporting rollbacks of fuel economy standards under the Trump administration.

“There’s been limited engagement with lawmakers to safeguard the sector’s future,” said Katherine García of the Sierra Club.

The alliance refutes this. “The auto industry has actively supported EV and battery manufacturing incentives,” said John Bozzella, Alliance president, citing outreach to policymakers, congressional meetings, and digital advocacy campaigns.

Automakers say they remain committed to electric vehicles. “We have some of the best and most successful EVs on the market today,” Mary T. Barra, the CEO of General Motors, told investors and analysts in May. She cited the Chevrolet Equinox EV, which dealers are offering for lease at less than $400 a month. The Equinox can travel more than 300 miles between charges.

But Barra added, “To protect our brands, we have moderated EV production to ensure that we stay aligned with the consumer demand to avoid the heavy discounts our competitors offer.”

Ford continues to work on manufacturing complexes in Tennessee and Michigan that will produce electric vehicles and batteries. The company is “deep into the development of our future electric vehicles, which we expect to be profitable, affordable and high-volume,” William C. Ford Jr., the chair of the company, and Jim Farley, the CEO, said in a report on the company’s sustainability programs.

Ford executives, including CEO Jim Farley, regularly visit China to test drive vehicles, with select models flown back to Detroit for analysis. Farley praised the quality of Chinese EVs, calling it “the most humbling thing I’ve ever seen.”

In California, a team of former Tesla engineers is developing electric vehicles aimed at matching Chinese models on price while offering greater appeal.

For now, Chinese carmakers are effectively frozen out of the United States by 100% tariffs. But BYD and others are already selling cars in many other countries, including Brazil, Britain, Mexico and Thailand, where they will be seen and driven by American tourists and business travelers. In years to come, political leaders in the United States may find it difficult to explain to consumers why they cannot buy cheap, capable electric vehicles that are available in other countries.

Protectionist policies may also encourage complacency by US automakers. If they don’t need to worry about Chinese rivals and don’t have to meet tougher fuel economy standards, they might delay investing in the latest technology and keep making large pickup trucks and sport utility vehicles that guzzle gasoline.

“We should be viewing this as a question of national competitiveness,” said Michael Lenox, a professor of business administration at the University of Virginia. “How long can you keep those cars from the US market through trade restrictions?”

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