Shifting gears: Will states take the wheel on US electric vehicle policy?

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Taylor Kuykendall:

Hello, and welcome to the Energy Evolution Podcast, where we dive deep into the trends, policies, and innovations, shaping the future of energy. I'm your host, Taylor Kuykendall, and today, we're exploring a pivotal shift in the electric vehicle landscape in the United States. As we know, the electric vehicle market's been on a remarkable trajectory in recent years, but in the past few months, we've seen a bit of a wrench thrown into that, as the federal support that's been the cornerstone of this growth, has been walked back. The Trump administration's decision to roll back electric vehicle incentives has significant implications, not just for manufacturers and consumers, but for state policymakers, who may now need to take the lead on EV adoption policies. Now, according to insights from S&P Global Commodity Insights Global Plug-in Electric Vehicle Long-term Forecast, we can expect to see even greater polarization in electric vehicle sales among the different states, especially because these federal incentives have been removed.

The analyst who wrote that report highlighted a crucial point. "Without these incentives, consumers may be less inclined to make the switch to electric vehicles, plus the lack of investment in charging infrastructure is a significant hurdle. Without a strong regulatory push or enticing incentives to encourage widespread adoption, it might be a tough road ahead for EV uptake." So what does this mean for the future of electric vehicles in America? Well, in this episode, we're going to discuss how the shift may empower states to take the lead in promoting electric vehicle adoption.

We're going to analyze the potential strategies that state governments might employ, the challenges they could face, and what all this means for the future of sustainable transportation. See, according to Commodity Insights, in 2024, the global plug-in electric vehicle market saw over 17 million EVs sold across the globe. The global market share hit a record high of 21.5%. When excluding China, approximately one in every 10 cars sold was an EV. So according to S&P Global Commodity Insights, PV sales are projected to surpass 20 million units in 2025, marking another record achievement.

Now, to discuss how some of these things might be changing, we've got three great guests on this week to discuss. We have Daniel Weeks, a reporter with S&P Global Commodity Insights, covering energy transition, Suzanna Massingue, Low-Carbon Transportation analyst at Commodity Insights, and Alan Collins, director and professor in the Division of Resource Economics and Management at West Virginia University. First up, let's talk to Daniel Weeks, fellow reporter here in the Commodity Insights newsroom. All right, Daniel, thank you so much for joining us here on Energy Evolution. Looking forward to hearing some of your insights.

Daniel Weeks:

Thank you for having me.

Taylor Kuykendall:

So just to start off, can you tell us, which parts of the recent budget bills are bearish for the U.S. electric vehicle market?

Daniel Weeks:

So the One Big Beautiful Bill Act, it gave a short deadline for a $7,500 electric vehicle tax credit, as well as another commercial tax credit for EVs, and it also shortened the deadline for an incentive for electric vehicle charging infrastructure. That one is going to expire next year, but that chunky electric vehicle tax credit is set to expire in September, which is a lot sooner than it was previously. And that tax credit played a significant role in shortening that gap between traditional internal combustion engine vehicles and electric vehicles. So you might see a short-term demand spike now that consumers know that that tax credit is expiring and they need to take advantage of it soon. That could happen, but in the long run, analysts are expecting a general slowdown in the U.S. electric vehicle market without those incentives.

Taylor Kuykendall:

Yeah. And one thing that we've talked about on the show before, of course, everybody was really excited, electric vehicles, when we first started seeing the prices come down, and it seemed like that was a really hot market for a minute, but then it seems the demand had kind of been starting to slow down even before the One Big Beautiful Bill. Can you tell us a little bit about the headwinds in the market, even outside of this bill?

Daniel Weeks:

Right. So whenever President Donald Trump was campaigning, he was talking about removing those incentives for a while. So the market was kind of preparing for Donald Trump to come in and shake things up in that space, among other factors, including tariffs, which electric vehicles are. They're very exposed to tariffs. Their critical battery supply chain is largely dependent on overseas markets, especially China.

So the idea of trade drama, complicating things there has an especially outsized impact on electric vehicles. And more recently, China is implementing restrictions on exports on some battery materials like lithium, and we're in the very early stages of that, so we'll see how that works out, and it might be better to talk to an expert on China there. But that's just another headwind for electric vehicles that might make them just a little bit harder for the consumer to get ahold of them.

Taylor Kuykendall:

Gotcha. Now, and given all this news, we are in the middle of, or at least getting towards the end here of hearing the first half earnings reports from all these companies. Tell me a little bit about what you're hearing from EV manufacturers and their performance.

Daniel Weeks:

Right. So when we talk about the U.S. EV market, we're almost entirely talking about the Tesla market. Tesla absolutely dominates the space. So anything that happens with Tesla is going to have an outsized impact on the U.S. EV market, and they're not doing that hot in 2025 so far. The CEO, Elon Musk said it best that, "The company is not immune to the macroeconomic uncertainties that's going to make a consumer not want to go out and buy a car," but the company's also not immune to the intense political backlash that Elon Musk faced at the start of this year, from his work with the Trump administration, which those two factors combined caused Tesla deliveries to fall significantly this year, so far.

But that's not exactly replacing who the king is at the moment, just to give you an idea, that Tesla leads, still the dominant manufacturer in California. They made up 41% of the electric vehicle market share in the second quarter, and the second place EV seller in California was just a 6% market share. So Tesla is still absolutely dominant here, but their market share is lower than it usually is, and their deliveries are down significantly year-on-year, and they're pushing to get cheaper models out, like a lot of other electric vehicle manufacturers, so we'll see how these trends continue. But in terms of other manufacturers that are hopefully looking to gobble up some market share for themselves, while Tesla is a little bit down, General Motors, they are selling a lot more electric vehicles and they seem to be doubling down on their all-electric strategy, but some major Japanese EV manufacturers are looking to slow down their electric vehicle investments. Ford, that's a big one in the U.S.

They're taking a big bite from tariffs and they're seeing a slowdown in their Model e, electric vehicle segment. So there's a lot of moving parts there. The most important players to watch obviously are Tesla, and then just to see who else is able to take up some of that remaining market share as Tesla is down at the moment.

Taylor Kuykendall:

Excellent. And as you mentioned, lots of moving parts there. So this is a bit of a difficult question, but I'm wondering, what do you think the EV market's going to look like going forward, and maybe how might we see regional trends within the U.S. changing?

Daniel Weeks:

Of course, yeah. So without those incentives, it's going to be harder for electric vehicles to ramp up here. So a bit of a slower trajectory than people previously thought, and we're likely to see increased polarization between states. As we mentioned in this conversation, that incentives are playing a big part in getting the electric vehicle market off the ground at the moment, and blue states like California and New York, they're just spending the most on these incentives. Whether it be for new charging networks, California is even looking to implement its own tax credit type incentive for electric vehicles.

So these states are likely going to have larger pieces of the electric vehicle market going forward, even though other red states like Texas, they have smaller incentives. They're not spending as much on that, but yeah. So we're likely to see polarization based on, if it's a red state, or blue state, or just whatever states are spending more money on those incentives. But even in states like California, Congress recently repealed California's electric vehicle mandate. That was something that was expected to be a significant demand driver for electric vehicles, and 17 other states had adopted those standards in whole or in part. So just overall, we're looking at a much slower adoption of this technology.

Taylor Kuykendall:

Excellent. Daniel, thank you so much for coming on and sharing your insights. We're definitely going to have to have you back as we continue to track this issue.

Daniel Weeks:

Of course. Thank you for your time.

Taylor Kuykendall:

Okay. So now let's talk to Suzanna Massingue. She's an analyst with Commodity Insights. So according to our most recent forecast, released in June, EV sales market share will reach 21% in 2030. That's down from 24% when we did the Outlook last year.

By 2050, we're looking at 74% market share. That's down from 80% when the Outlook was done last year. That report also notes that while some states will fund clean transport projects independently, many will not, and that's going to lead to disparities in the electric vehicle adoption rates in the United States. Okay, let's hear from Suzanna.

Suzanna Massingue:

Yeah. So the Trump administration's recent policy shifts have significantly impacted our outlook for electric vehicle adoption. To provide some context, at the start of the year, President Trump signed a flurry of executive orders, which really set the scene for rolling back the Biden era, environmental policy, the range of different policies that were available, which included the Inflation Reduction Act, whereby buyers of electric vehicles were entitled to up to $7,500 in tax credits for the purchase of an electric vehicle. And so a bill has been passed, and now, as of September 30th, so next month, buyers will no longer have this credit, which obviously affects affordability. And we know that in the U.S., a mid-range electric vehicle can cost tens of thousands of dollars more than an ICE car, and the second-hand market for electric vehicles is still yet to mature.

So finding affordable EVs in the market is still super, super challenging. Trump's policies have also impacted supply side, supply chains, and with trade negotiations and tariff settings continuing, the whole auto industry will really be affected, but EVs specifically are exposed to these tariffs due to their reliance on rare materials, who supply chains are really intertwined globally. So across China, Canada, Mexico, all countries that have had tariffs imposed on them, quite high tariffs. And so ultimately, given this uncertainty in policy, ongoing trade negotiations, we've adjusted our short-term and long-term outlook downwards. Consumers are becoming increasingly price-sensitive, and as federal support for environmental programs diminishes, state governments really have to step in and have the autonomy to promote EV adoption, or not promote EV adoption, which ultimately will lead to a bigger discrepancy between states in terms of EV adoption.

Taylor Kuykendall:

Can you tell me some of the ways you think states might respond to these federal incentives, how that might affect the consumer demand there? And in those different states, as you mentioned, what are we looking at exactly here across the U.S.?

Suzanna Massingue:

Yeah, so California has had long-standing air quality programs, so the Clean Air Act, which has outlined a number of standards for fuel efficiency and tailpipe emissions for different pollutants, and these have been grandfathered in because they predate any kind of federal equivalent. So California is currently in a legal battle, actually, with the current administration. While some other states have adopted California standards, they're unable to set their own just for legal reasons. So yeah, it's a bit tricky. There's not a lot that other states can do other than support California in their court in their fight.

But just drawing from New York as an example, financially, the governor has announced the $30 million initiative, which was announced in April to incentivize EV purchasing, so it's similar to the IRA tax credit. It's slightly less. It's $2,000. But yeah, states are trying to provide financial support where they can, but yeah, it's an ongoing battle. I think California will go down the legal route, and it'll be interesting to see how it goes. Very unprecedented.

Taylor Kuykendall:

On the other side of the coin, are there any specific states that you think will maybe struggle more than others to maintain EV adoption rates with these federal incentives gone?

Suzanna Massingue:

Yeah. Well, as you say, it really is the other side of the coin. So any states that have not prioritized any EV incentives, whether it be kind of purchasing incentive that I've mentioned, or charging infrastructure rollout or anything like that, those are the states that are really going to lag behind. I'd also say that states with low-density, sparse rural communities are particularly at risk of lagging behind, just because electric vehicle adoption is more conducive to urban living, where you have shorter trips. It kind of overcomes the range anxiety issue, where people are worried about being able to complete a journey. Charging infrastructure is just more dense, is a more dense network, and so states like Alaska, for example, are likely to fall behind.

Taylor Kuykendall:

I'm wondering, can you think of ... In terms of long-term trends, what do you see for the electric vehicle market in the United States, particularly as we go through these next few years with these changes in policy? Are we talking slower growth, we talking about continued growth, or are we looking maybe even a worst case scenario, where the adoption rates actually turn around and go the other direction? What do you see for the future?

Suzanna Massingue:

So definitely slow growth. 2025 has already shown that there is positive growth, but it's just at a slower rate than we've seen in previous years in the past two, three years. I think that whilst that can be put down to things like the end of the tax credits and that kind of fiscal support, there's just generally a kind of sentiment of uncertainty, and so people are not looking to buy EVs at the moment. But with that said, we do think that there will be continued growth. It will just be slower, and it will be at varied rates across different states.

Additionally, globally, the cost of EVs are falling, and they're falling quicker than the cost of internal combustion engine vehicles. And so down the line, I think the next four to five years will be slowed growth, but we are definitely not saying that there'll be a decline.

Taylor Kuykendall:

You mentioned the price of these vehicles going down, but aside from continuing to work on getting the cost of electric vehicle down, is there anything you think private companies might be able to do to fill in the gaps that these federal incentives were kind of creating to encourage people to get electric vehicles and infrastructure around it?

Suzanna Massingue:

Yeah. I think it's a really interesting space, actually, for private companies, and not just kind of automakers, but also energy providers. I'd like to draw from an example in the UK, where BYDs or Chinese automaker, and a British energy provider, called the Octopus, they've come together to provide a really innovative leasing business model, whereby users can lease a vehicle, an electric vehicle, and the cost of installing the charging infrastructure at home is subsidized. And so ultimately, it's kind of firstly breaking the initial upfront cost of buying an electric vehicle, which is a big deterrent to people, and then secondly, it's allowing people to try before you actually buy, like testing out the electric vehicle lifestyle. So it's interesting.

It's rolling out at the end of this year in the UK, and I'm keen to see how well it will do, and I think if it does well, it's definitely one that may be rolled out just more widely globally.

Taylor Kuykendall:

Excellent. Excellent. Thank you so much, Suzanna, for joining us today. Appreciate you sharing your insights.

Suzanna Massingue:

Thank you.

Taylor Kuykendall:

All right. Next, let's hear from Alan, the professor at Western Virginia University. In March 2024, he published research in the journal, Renewable and Sustainable Energy Reviews, concluding the environmental policies encourage EV adoption more than financial incentives, that tax credits have a greater impact on EV adoption than rebates, and that there was a need to nationalize lowering greenhouse gas emission policies to promote electric vehicle adoption. Well, that study was done before some of the big pro-EV policies of the Biden administration were enacted. We want to talk to Alan about what he thinks the rollback of those federal policies means for the EV industry and the U.S. Okay, let's hear from Alan.

What are some of the challenges or concerns one might have on having kind of this patchwork of policies, if you will, across states? Say, I'm in a EV-friendly state, and I want to be driving through another, might that present some challenges? And, I guess, why is it a big deal, I guess, maybe that some of these states might be taking different approaches?

Alan Collins:

Well, I'll start off by saying under U.S. governmental system, we work under a federalized system, and this is something that throughout my years of teaching, I emphasize to students. From a research standpoint, this gave us, researchers a lot of opportunities to look at differences across states, and because essentially this is the research that we've done here, is look at these differences across states. As you note, the challenges are those individuals that live in states, like I do in West Virginia, where EV policies are not as great in terms of incentivizing the ownership electric vehicle. We don't have it in the state of West Virginia, as many policies that would encourage electric vehicle ownership, particularly in terms of tax credits or rebates for ownership or for purchase of that such vehicle. So again, with the departure of federal policy from, particularly in terms of income tax credits, with that departure of that policy, what that means is that now, you do have these larger differences across states.

And again, the time period we studied was 2012 to 2020. Some of the state-level policies that were in existence then have since expired, and so those number of policies aren't as readily available as they were during that time period. And so now, there's much fewer policies that are encouraging electric vehicle ownership in terms of both income tax credits or rebates, or at the federal-level, the subsidy of providing tax credits for installation of in-home chargers as well.

Taylor Kuykendall:

You hinted at this, so these different kind of policies have different levels of effectiveness, whether we're talking about environmental regulations or we're talking about incentives. I'm just wondering if you're a state out there who wants to drive greater EV adoption, I mean, what would be your recommendations? On what sort of policies work the best or most efficient, especially start to think about what it might cost your state to run such a program?

Alan Collins:

Well, that's a tough question.

Taylor Kuykendall:

Quickly design a perfect EV policy, right?

Alan Collins:

Why? I'm not a state policymaker. One thing I will note is that some states ... Let's see. I'm doing count now. I think it was eight states in our data set, had rebate policies.

The problem with rebate policies and why they weren't particularly effective is that states have to balance their budget, and generally those rebate policies came with a cap of amount of money that was available. And if you tried to get a rebate after the cap was met, then you were out of luck. And so again, states, unlike our federal government, have balancing budget requirements, and so these policies that are implemented at state, particularly the financial policies, those are somewhat limited as opposed to the federal government doesn't tend to limit the policies, and so the income tax credits at the federal government level, there's no cap, and so you always get them regardless of when you buy a vehicle, not if there's enough money available. So in terms of what I, as a researcher, might recommend ... Again, during our time period, those environmental policies were most effective.

I'm going to sort of switch from there and say it's the infrastructure policy. I think that states can encourage and make use of federal dollars to put in adequate charging infrastructure throughout the state, and essentially try to eliminate any range anxiety that might exist among EV owners, and so that they're more comfortable with buying electric vehicle and knowing that charging stations are distributed such that they can go on trips and not worry about having to charge their vehicles.

Taylor Kuykendall:

Based on just kind of what you've seen, and I know we were starting a time period that was older, and that was obviously a very kind of, it was an emerging industry, lots of explosive growth, but just kind of given the outlook we're seeing and the way that the federal government's currently talking about EVs, what's your kind of prediction on the direction of EV adoption rates? Are we going to see growth stop? Do you think growth is going to slow, or do you think we're going to continue to see ... Maybe we will see states take up the mail and kind of lead on this. What would you guess is going to happen?

Alan Collins:

Well, hard to forecast. I would say that one, we looked at EV registrations per 100,000 population, and I think that's going to continue to grow, because, of course, as you get more EVs, ownership within the population, the registration number will increase. So it'll increase. I would project obviously slower than would've happened if the federal tax credits had continued through their 2032 expiration date, which was the original Inflation Reduction Act under the Biden administration. I've seen projections where the sales of EV are going to decline by about 40%, is one projection by the year 2030.

Again, that's a projection based upon the with versus without federal income tax policy, that gives tax credits to purchasers of new and used EV vehicles. So obviously, there's going to be a slowing of EV purchases without that tax credit. Some of the research that I've done and I did in-class exercises with students, showed that even with those, even the existing tax credits, internal combustion vehicles are still less expensive to run over the long-term than EVs. EVs have a lower maintenance and annual cost of operation because electricity is just more efficient in powering vehicles than gasoline. But given the current state of price differential between EVs and internal combustion engines, those EV vehicles tend to be priced too high at the moment, and even with the current federal tax credit, it just made more sense economically to buy a gasoline-powered engine than a EV.

Now, hopefully, those EV prices will come down in the future. Again, we're ramping up production within our major automobile manufacturers. Overall, the concern I would have of what the Trump administration has done in terms of both the electric vehicle manufacturing industry and ending the tax credits to consumers to buy new and used EV vehicles, my major concern would be is we, as a society in the United States, are conceding the EV market to largely China now. Again, we can look at the U.S. markets. Something less than 10% of new cars sold are electric vehicles currently.

That'll obviously go down when consumers no longer have the tax credits available to them. But if you look at globally, about 20% of the cars sold globally are electric vehicles, and that is only going to go up with the environmental concerns, climate change concerns throughout Europe and Asia as well. The long-term issue that I would see, with the current administration policy, is that if we disincentivize and don't encourage electric vehicle ownership here in the United States, we as a country may fall behind in terms of our ability to produce electric vehicles that the rest of the world would want. And so again, we need to consider both U.S. market and global market as well, when we look at these policies that we put in place to encourage our domestic market that also has international implications as well.

Taylor Kuykendall:

All right, listeners, thank you so much for listening to the latest episode of Energy Evolution. I want to give a special shout out to our incredible podcast team members. I am once again Taylor Kuykendall, but some of the other people that work with this podcast include my co-host, Eklavya Gupte, Camilla Naschert, Christopher Coates, Dan Testa, Karen Willenbrecht, and our wonderful agency partner, The 199. To stay up-to-date with our upcoming episodes, be sure to subscribe to Energy Evolution on your favorite platform. If you have any ideas for future themes or guests, we'd love to hear from you.

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