COMMODITIES 2025: Political barriers in US EV space to pressure supply and demand

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The upcoming administration and other market forces will put pressure on electric vehicle supply and demand, but momentum carried over from 2024 and blue states doubling down could push US EV growth to continue in 2025.

President-elect Donald Trump is vocal about his stance on electric vehicles, taking aim at the Biden-era EV tax credit and electrification mandates on multiple occasions. Removing this tax credit would be disadvantageous for the whole US EV industry and further the cost parity with internal combustion engine cars, said Suzanna Massingue, low carbon transportation analyst at Commodity Insights.

"We do expect that short term sales won't be drastically decreasing in blue states, but there will be a bit of a compound effect and kind of overall sales," Massingue said regarding the effect of Trump 2.0 on the US EV market. Despite the challenges, Massingue expects annual EV growth in 2025 to "probably be similar to 2024."

In the run up to the election, EV sales were doing "pretty well," Massingue said. The US plug-in EV market share was 9.9% in October with 133,553 sold, an 18.7% increase year over year. That momentum will continue for at least the first half of 2025 or until the $7,500 tax credit is unraveled, Massingue said. "That's when we'll really start to see how people actually feel about them."

That tax credit has "disproportionately" benefited Tesla, on account of being the highest selling EV company in the US and globally. When demand is affected by a tax credit repeal, "it will be interesting to see whether Elon Musk advocates for some sort of alternative to be put in place," as the Tesla CEO is looking to play a role in the new administration, Massingue said.

The US EV market will be more open to the effects of market forces and policies like new tariffs as federal support programs are stripped away. This will cause state-level subsidies to become increasingly important, Massingue said.

"What we've seen globally is that closing the gap on the total cost parity between electric vehicles and internal combustion engine vehicles is really the way that people kind of start to shift over to EVs," she said. "A lot of blue states who want to support adoption will try somehow to continue to have subsidies and some sort of credit system, whether it's achievable or not."

California, the US state with the most active EV market, saw some of its auto emission policies under attack during the first Trump administration. Ahead of the change in administrations, Biden's Environmental Protection Agency moved to cement California's mandate banning new ICE vehicles by 2035 in December.

"Ultimately it will come down to consumer awareness and sentiments around EVs, and perhaps that might have a long term effect," Massingue added.

Political barriers on the supply side

By 2028, US EV manufacturing facilities are projected to produce approximately 4.7 million new electric vehicles annually, which will account for about 32% of all vehicles sold in the US in 2023, the Environmental Defense Fund said in a January 2025 market report. US battery manufacturing capacity is expected to reach 1,083 GWh by 2028, the EDF said.

Looming 2035 bans on ICE vehicles are hurting the profits of OEMs in the United Kingdom and the EU, and similar issues are expected in the US with states that have similar policies, Massingue said.

Global tensions between western countries and China, including higher tariffs from both the US and EU, add another bureaucratic layer that OEMs will have to think about, Massingue said. Tariffs on Canada and Mexico would also have a significant impact on EV production in the US, she said.

Additionally, global lithium supply is projected to peak in 2025. However, if the critical mineral in battery production were to become a supply challenge, advancements in the technology towards other minerals and towards increased efficiency could offset that challenge, Massingue said.