US New Orders Can Drop EV Adoption To 23%: Wood Mackenzie

United States (US) recent executive orders could have profound implications on electric vehicles (EV), slowing down the pace of adoption, according to a recent report from Wood Mackenzie. According to its report, “Trump’s executive orders unsettle electric vehicle and battery markets” policy changes have impacted the EV, battery, and raw material markets in the US and globally. The wide-ranging changes will affect everything from subsidies for consumers to funding for EV charging stations, as well as trade tariffs on imported raw materials.

“Enforcing a stricter new policy could lower plug-in EV adoption from 32% to 23% by 2030,” said Reid.  “While the extent of subsidy cuts and details on new emissions norms are unclear, we expect the trajectory of EV sales to be slower than previous forecasts.”

Electric vehicles

“The ‘Unleashing American Energy’ order could have significant impact on the EV market, especially if the administration removes the US$7,500 consumer 30D and commercial 45W EV tax credits,” said Max Reid, principal analyst at Wood Mackenzie. “This is yet to be determined, but Wood Mackenzie does expect any remaining EV credits to contain stricter eligibility criteria around critical mineral sourcing to promote mineral security.”

Other moves that could come into play include easing the Environmental Protection Agency (EPA) tailpipe emission norms, which require an EV penetration of roughly 70% by 2032, and removing California’s ability to set its own emission norms, thereby eliminating the zero-emission vehicle (ZEV) mandate, which impacts 30% of the US light vehicle market.

EV Charging Infrastructure

Trump’s recent executive order specifically demands a 90-day pause to review the National Electric Vehicle Infrastructure (NEVI) and Charging and Fueling Infrastructure (CFI) schemes. Up to and including 2025, US$3.2 billion has been apportioned to states, but only US$600 million has been awarded in contracts for over 4,500 charging ports.

Contracts already awarded to suppliers are unlikely to be affected; however, as indicated, US$600 million is only 19% of the total funding. Award announcements increased in Q4 2024, as many states were concerned about the future of NEVI funding. However, in context, NEVI-funded ports accounted for only 126 of the 14,000 new ports in 2024 (0.1%).

“Naturally, we expect more NEVI stations to open in 2025, but the NEVI funding was a part of the broader picture,” said Reid. “The pace of charging infrastructure deployment should remain unchanged in early 2025, but lower EV sales may temporarily cause a dent in deployment towards the end of the year. So, growth in charging station deployment in 2025 may not be the same 30% as we observed in 2024, but overall, we believe growth is inevitable.”

Batteries

Wood Mackenzie expects a tightening of the 30D tax credit to hurt demand for EV batteries, reduce renewable installations, and dampen energy storage battery demand. The base case forecast shows that the annual US EV and energy storage system (ESS) battery demand will increase to over 500 GWh by 2030, but a bearish scenario suggests this could be closer to 400 GWh. The key role batteries will play in US energy security is an upside risk to demand under the new administration.

Raw Materials

The US currently relies on China for most of its battery raw materials (BRMs). A proposed 60% tariff on imports from the world’s largest producer would increase prices for battery cells by 29% and cathode by around US$10,000/t. This will undoubtedly increase EV prices on top of reduced subsidy and slow down sales, but the tariff will make domestic or ally nation supply more attractive. Trump has promised to add tariffs to Canadian and Mexican imports by 1 February. Mexico has few BRMs, so trade with Canada is the one to watch.

“The US imports around 50% of its refined nickel from Canada,” said Reid. “In theory, the US could replace Canadian imports, but the reality is that the form of the metal is difficult to source elsewhere. Moreover, nickel is used extensively in the aerospace sector – an industry where switching suppliers is a lengthy process. We expect imports to continue despite tariffs, increasing costs further down the supply chain.”