First up: The federal electric vehicle tax credit is still in effect. It hasn't been erased by the tip of Donald Trump's pen, because it can't be. The tax credit — $7,500 for a new electric car and $4,500 for a used car — was passed by Congress as part of the Inflation Reduction Act, and another bill will be needed to repeal it.

Now for the bad news: Congress, at Trump's behest, is likely to eliminate the tax credit at some point in the near future. Republican lawmakers have tried to kill that credit several times in the past, most recently in July 2024. But with Democrats in control of the Senate and Joe Biden in the White House, those efforts have gone nowhere.

The Republicans now have complete control of Washington. It looks like the tax credit will be consigned to the trash can. But that will take time, and so will Trump’s efforts to roll back emissions rules. Deals need to be struck, legislation drafted, public input sought, hearings scheduled, and more. How long that all takes depends on how aggressively Trump and the Republican Party want to move away from Biden's electric vehicle legacy. Congressional sluggishness and some Republican pushback will likely result in the incentives remaining in the tax code through the end of the year.

Trump's first-day blitz of executive orders offered some hints about the future of the auto industry. So are a series of potential spending offsets proposed by House Republicans, including new fees on electric vehicles and eliminating a tax credit loophole for leasing electric vehicles. For better or worse, Biden has made electric vehicles a centerpiece of his multibillion-dollar effort to reduce carbon emissions, and now Trump and Republicans aim to do whatever they can to reverse course. Ultimately, their efforts will make it more expensive to buy and own electric vehicles, which will have far-reaching consequences for the auto industry, consumers and the environment.

“It’s hard to say how the auto industry will respond,” said Kathy Harris, director of clean vehicles at the Natural Resources Defense Council. "But I think what we've seen is that over the decades, these regulations that the EPA has introduced have really delivered tremendous benefits not only to the auto industry, but to Americans, to American wallets and to public health. Brilliantly. "

You'll notice that the auto industry doesn't seem particularly enthusiastic about these changes. While all the Silicon Valley billionaires came out to celebrate Trump's inauguration, Detroit's Big Three automakers kept their distance. The only person to make the trek to Washington to kiss the ring was Stellantis chairman John Elkann, and even he split before the inauguration, flying back to Italy to be with F1 star Lewis Hamilton . (Who can blame him?)

Automakers plead for stability, but what they're likely to get is everything. Trump's threat to eliminate EV incentives could dampen sales, but the president's planned 25% tariffs on Mexico and Canada could spell greater disaster. Global supply chains are extremely complex, traversing many different countries and crossing borders, and the new costs could force companies to begin the arduous process of redesigning these production lines. Trump's position is that tariffs will force automakers to move more manufacturing to the United States and create jobs. But most experts predict prices will rise and sales will fall if cars become more expensive, forcing dealers, suppliers and manufacturers to start considering layoffs.

Trump may face resistance from his own party. An August 2024 letter to House Speaker Mike Johnson signed by 18 Republicans warned that "premature repeal of the energy tax credit... would harm private investment and halt development already underway." ." These members represent some of the states that have received the highest levels of clean energy investment as a result of the IRA.

It certainly doesn't help that the auto industry was already trying to put out multiple fires before Trump put pen to paper. The pandemic-era sales boom has been replaced by a post-COVID slump, and many companies are feeling a hangover. After cutting nearly 9,000 jobs, Nissan is trying to merge with Honda to take on the fast-growing Chinese automaker. Volkswagen is struggling to keep European plants open while spending billions of dollars on a new joint venture with troubled Rivian. Stellantis' chief executive resigns after falling sales. Even Tesla, the only automaker to fully align itself with Trump, experienced its first sales decline in more than a decade. Tesla is losing billions of dollars in brand value despite CEO Elon Musk making what a German newspaper called a Nazi salute.

While most executive orders are merely shocking, they are also initiating more meaningful policy changes. In addition to the electric vehicle tax credit, Trump is targeting Biden's tailpipe emissions and fuel economy standards, as well as a waiver for California to set its own emissions rules under the Clean Air Act. Most of them he tried during his first term, with mixed results.

"The executive order simply directs agencies to look at the regulations," Harris said. "So I think 30 days is the deadline that agencies need to report their list of regulations for review."

What will happen next is anyone's guess. Will EV sales remain flat? Will Volkswagen acquire Rivian? Will the Nissan-Honda merger fail? Will Strantis go bankrupt? Will Republican lawmakers, whose districts are actively benefiting from Biden's EV investments, force Trump to reconsider eliminating EV incentives? Can Musk remain in Trump's favor and deliver?

The only thing we can hope for is a legal challenge. Trump's day-one executive order did not provide any specific policy action on electric vehicle tax credits, emissions rules or manufacturing incentives. But once these start to take shape, you can bet a wave of lawsuits will follow.