At the beginning of his term, U.S. President Donald Trump instructed federal agencies to halt funding under two laws signed by former President Joe Biden-the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act. He also plans to eliminate the Biden administration's EV tax credit of up to $7,500 per vehicle.
If Trump ultimately revises the IRA, more than $100 billion in EV manufacturing investments and approximately 84,000 jobs in several states that helped him secure victory in the November election could be at risk.
Investment Landscape
According to data from Atlas Public Policy, a U.S. automotive research think tank, since the IRA was passed in 2022, automakers and parts suppliers have announced a total of $116 billion in investments in the U.S. EV production sector.
An analysis by Automotive News, based on Atlas Public Policy data, shows that 90% (approximately $105 billion) of the EV manufacturing investments announced since the IRA's passage have flowed into Republican-led states. The top investment-receiving states include Georgia, North Carolina, South Carolina, Michigan, and Indiana, each receiving more than $12.5 billion. In contrast, Democratic-led states have only received $11 billion in announced investments.
Atlas data also indicates that 6.6% of the investments (totaling $7.7 billion) have gone into operational factories, over half ($63 billion) is being used for ongoing construction projects, and around 40% ($45.8 billion) is allocated to projects still in the planning phase.
For IRA-funded projects, 2025 will be a critical year. Atlas Public Policy reports that factories representing $40 billion in investments are scheduled to start operations in 2025-more than any other year between 2022 and 2030. The second-highest projected year is 2027, with $19 billion in planned investments.
However, as EV sales slow, automakers have delayed some EV production plans and are increasingly prioritizing hybrid vehicles. According to Cox Automotive, new EV sales in the U.S. are expected to grow 7.3% in 2024 to 1.3 million units, a sharp decline from 49% growth in 2023.
Additionally, of the new EV manufacturing jobs announced since 2022, about one-third (30,593 jobs) are expected to launch in 2024 and 2025.
Nick Nigro, founder of Atlas Public Policy, told Automotive News that these announced investments are "transformational" in many regions. He emphasized the need to continue investments, see projects through to completion, and support American companies in competing fairly, especially against China-based companies.
Automotive News reports that the IRA has become a cornerstone of the U.S. EV supply chain and a key tool in competing with China. Some Republican lawmakers are working to preserve EV incentives to support their local economies. Georgia Republican Representative Buddy Carter argues that the IRA stimulates economic growth, keeps the U.S. competitive, and enhances national security. Carter stated:
"We must ensure these policies remain in place and do not jeopardize the economic development of communities that have already received investment."
The Industry-Wide Impact of Repealing the IRA
Republicans opposing the IRA argue that its costs justify its repeal. The U.S. House Committee on Ways and Means cited analysts estimating that the IRA could cost up to $1 trillion.
George Whitcombe, an analyst at Rho Motion, a battery research and consulting firm, warned that removing federal incentives would further delay the construction of EV assembly plants, battery facilities, and parts factories. For some EV parts suppliers, losing this funding would be significantly damaging.
Eliminating or reforming EV manufacturing incentives could lead to overcapacity and stranded capital for automakers and suppliers. Many automakers and suppliers view these incentives as critical to their EV business strategies.
In its Q3 2024 filing with the SEC, EV manufacturer Rivian stated that reductions or eliminations of federal and state EV incentives would directly impact demand. Rivian also noted:
"Failing to qualify for tax credits could put our products at a price disadvantage and could have a material adverse effect on our business, outlook, financial condition, operating results, and cash flow."
Michael Robinet, Executive Director at S&P Global Mobility, believes that even if manufacturing incentives remain, eliminating the $7,500 consumer EV tax credit could result in underutilized factories.
Robinet pointed out that disrupting one part of the EV ecosystem affects others. Without consumer incentives, EV sales could slow or decline, impacting new market entrants. States with EV battery production facilities would face major economic challenges.
If EV sales fall below expectations, factories could become underutilized, leading companies to lay off workers or fail to fulfill their job commitments. Robinet emphasized:
"Scale is critical. Without the right scale and the ability to lower battery prices, this could become a never-ending cycle."
