“I don’t know,” I said to a friend.
My friend has a gas-powered car and they’re interested in making a switch to an electric vehicle. They know I write about EVs, and they had questions. I’d call them “Ohio comfortable,” making a wage above the median in this state with enough to have a house and a car or two, but chump change in any given top-five U.S. metropolitan area.
Like many Americans, they had been watching in horror as the Trump Administration—either with or without Elon Musk’s help—slashed away so many key programs meant to support a fair chunk of American life. Within weeks of Trump taking office, century-long relationships of trust between us and our allies have crumbled. Economically and politically, the future feels very uncertain right now.
“Should I get something now, or should I wait until more models are on the market?” they asked, unsure if any forthcoming tariffs or incentives or tax credit programs would still be around by the time they figured out exactly what they wanted.
They were stuck between a rock and a hard place. I know that the tax credit incentives are a real make-or-break factor for people like them, and me, and just about anybody else without big luxury money to burn. EVs are still expensive, and the tax credit (whether new or used) made electric motoring accessible to them. Right now, that’s still in play.
But the whole program may soon be gutted, likely right in the middle of implementation, and probably with no way for dealers or buyers alike to get the monies they once thought owed. To these Ohio-comfortable people, that $4,000 to $7,500 represents months of income and that’s not something to just dismiss.
It’s especially true when vehicle selection is generally limited to higher-end crossover and truck options, with the addition of affordable EVs seemingly becoming more distant by the day.
“Do you think there will be more models coming soon?” they asked. I didn’t have a good answer for them. Of course, I know that more EVs will be introduced in our market soon, but tariffs, cancellations, rising inflation, and an increase in anti-China sentiment mean that things do not look all that good for the U.S. auto industry, including EVs. And I’m not the only one who feels this way.
“I think everyone kind of just expected the U.S. to be this fallback,” said Tyson Jominy, Vice President of Data and Analytics at J.D Power. “Okay, fine, China's gone to [hell] and all the EV investments have gone to [hell], but at least we could fall back on selling SUVs in the U.S., right?”
Jominy is referring to the fact that sales of non-Chinese brands have cratered in China, an endless headache for General Motors or the Volkswagen Group. So there was always an assumption that the U.S., the world’s second-biggest car market, could still be a fallback for consistent sales, especially higher-margin trucks, luxury cars, and SUVs. Volkswagen has even said that’s why it’s doing the Scout Motors brand here and bringing over Cupra from Europe.
But now, Jominy said, things are so inconsistent—every other day we’re staring down tariffs on vehicles and parts made by our allies. Whether it be the new 25% tariff on steel and aluminum from Canada, or the proposed tariffs on all goods from Canada, Mexico and now possibly Japan and all of the European Union, these heavy-handed tariffs would touch nearly every single part of the vehicle manufacturing process.
Here’s the thing. These tariffs aren’t on new agreements. They’re hitting ones that every manufacturer would have rightfully called longstanding and reliable without a second thought. Before USMCA, we had NAFTA, which ignited Mexico’s car manufacturing scene 31 years ago. Canada has been a key supporter of the American auto industry for 100 years. These longstanding, reliable agreements improved the economies of all three places and gave us reasonably affordable cars. And it could all be dashed to pieces, on the belief that tariffs will either replace income tax revenue or instantly drive more car manufacturing stateside.
Never mind the fact that setting up a car factory takes years and billions of dollars. Or the fact that the Biden-era Inflation Reduction Act was actually driving car manufacturing here anyway. All of that could go away if the incentives do. And then EV batteries will never get cheaper, and cleaner, more high-tech cars that don’t use gas will always be out of reach.
The Canadian counterparts to Honda’s EV hub or any Canadian EV production expansion are now in limbo. Add in the threat to EV tax credits, and it’s clear why so many brands are hanging in limbo. Honda certainly was when I asked about their plans to head off tariffs while visiting their Ohio EV hub in late January. GM finally got the secret sauce right on its EVs, but now the Mexican-made Blazer EV, Cadillac Optiq and Equinox EV are facing huge tariffs. That would seriously hurt one of the key things we need: affordable EVs.
Jominy explained that these tariffs put brands and buyers alike between a rock and a hard place. On one hand, J.D. Power estimated that if tariffs are implemented like the Trump administration says (the plan calls for 10% tariffs on Mexico and Canada, 25% everywhere else) the gross price increase on average for Americans would be around 2.5%. That doesn’t sound so bad, but the devil is in the details. The tariffs would hit harder on more affordable cars, further pushing buyers out and reducing demand, hurting every automaker’s bottom line.
Don’t think this is just for EVs; it hits everything. The Ford Maverick? It’s made in Hermosillo, Mexico. The Chevrolet Trax? Korean made. Ford Mustang Mach-E? That’s also Mexico. The Kia EV3 that Patrick George raved about? It’s made in Korea right now, and Kia clearly wants to take it elsewhere but doesn’t have a damn clue where, thanks to everything right now. If you thought you’d get a Chinese-made something or other, just go ahead and put that out of your mind right now. That 100% tariff likely won’t go away any time soon.
Jominy was clear about what would happen if the tariffs went through: Cars will get more expensive. “If the original proposed 25% tariffs on Canada and Mexico go through, that would have added about 8% [increased costs],” he said.
Now, the automaker is forced to do one of two things—eat those increased costs, or somehow spread that across the lineup and hope the reduced demand doesn’t kill them. If they eat the costs, that would essentially wipe out profit margins. If they pass it along to consumers, then prices go up in a country already weary of inflation. This is why Jominy described the auto industry as sitting in something of an existential crisis, unsure as to how exactly to move forward.
“There's almost no situation where anyone is better off, right? Neither consumer nor automaker. I mean, it hits everyone,” he said.
And to add insult to injury, Trump could approve or renege on it at a moment’s notice.
How do you plan for that type of uncertainty? Whether you’re a consumer or an automaker, things look grim. Sure, transaction prices and sales of some models did grow for 2024, but these existential threats to EVs that seemingly yo-yo every few hours are why “no one feels good right now,” according to Jominy.
These are some of the reasons why J.D Power’s Electric Vehicle Experience (EVX) Ownership Study, found that EV adoption will likely stay flat this year, holding still at 9.1% for 2024. However, this survey was done before Elon Musk’s hard pivot right and the galvanization of anti-Tesla protests and mass sell-offs. The real numbers could end up being lower.
Still, that doesn’t mean that EV investment should stop. On the contrary, It’s now imperative for automakers to push forward, because they can’t just go back.
“So I think most automakers, if they're honest, are somewhat relieved if the EV requirements are lessened, that they can go back to ICE,” said Jominy. “But the challenge is, they haven't been investing in ICE. So now we're looking at the oldest ICE portfolio we've ever seen since [J.D. Power] has been collecting data. If you've owned a vehicle for six years, and you come back to the market, and you go there and it's the same one and now my payments have doubled, that doesn’t make sense.”
As a result, we get a Catch-22. Manufacturers would have to quickly spool up halfhearted freshenings of ICE cars, which takes money they don’t have to build bad cars that consumers can’t afford or don’t want. And this is also specific to the U.S. market. On a global scale, manufacturers would be wasting money on a band-aid product that only makes sense for the U.S. That’s not exactly wise in a global market that continues to electrify.
In short, something’s got to give. When my friends ask me if they should buy an EV now or wait until something better comes along, I just don’t know. When people ask if the Kia EV3, or Hyundai Inster, or Mini Aceman, or any Chinese BYD would eventually come to the U.S., I don’t know. In fact, I think that all of those brands are on the same page here. It’s a bad idea to enter the U.S. market and it’s probably best to stay at home.
Or, hope and pray that some consistency comes through soon.
Contact the author: Kevin.Williams@InsideEVs.com
