While electric vehicle demand is expected to continue growing this year, the forecast is clouded by uncertainty surrounding potential policy changes and tariffs, reports AP.
S&P Global Mobility predicts global sales of 15.1 million battery electric vehicles in 2025, reflecting a 30% increase. These vehicles are expected to capture 16.7% of the light vehicle market.
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Tesla, China's BYD, and other manufacturers face significant uncertainties in 2025. Under Donald Trump's presidency, major policy changes related to taxes and incentives for both electric vehicle producers and consumers could occur. The possibility of tariffs on imports and retaliatory tariffs globally could further complicate production and sales for electric vehicles.
“There's just a lot of uncertainty in the air,” said Stephanie Brinley, associate director of auto intelligence at S&P Global Mobility. “It’s not an environment where you want to necessarily go gangbusters.”
In the U.S., consumers can currently claim a federal tax credit of up to $7,500 for certain new electric vehicles. Car manufacturers have also benefited from federal support for electric vehicle production and infrastructure. However, all of this may be at risk under President Trump.
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Trump has criticised the federal tax credit for electric vehicles during his presidential campaign, calling it part of a “green new scam” that would harm the auto industry. Nonetheless, the incoming administration is expected to push for wider deregulation of industries, which may benefit carmakers.
Despite benefits for consumers and manufacturers, some large electric vehicle makers faced mixed results in 2024. Tesla saw a 1.1% drop in sales, marking its first annual sales decline in more than twelve years. Meanwhile, Rivian's deliveries rose by 2.9%.
Tariffs also pose a threat to the industry. As production occurs globally, parts are imported and exported throughout the process. Trump has threatened to tax imports from Mexico, Canada, China, and other countries, potentially triggering retaliatory tariffs.
China is the largest market for electric vehicles, followed by the U.S. Within the U.S., Tesla holds a dominant 50% market share.
Automakers, like many industries, are adopting a wait-and-see approach to determine whether Trump will follow through on his threat to rescind tax credits and impose tariffs.
The broader auto industry is proceeding cautiously. S&P Global Mobility forecasts a 1.6% decline in light vehicle production in 2024, followed by a further 0.4% drop in 2025.
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This is attributed to automakers aligning production with demand. Overall, light vehicle sales are expected to increase by 1.7% in 2025.
The ongoing shift to electric vehicles also contributes to more measured production. Companies such as Ford and General Motors are reallocating production capacity towards electric vehicles, sometimes at the expense of expanding overall capacity.