When it rains, it pours — or so it goes for America’s beleaguered electric vehicle industry.
President Donald Trump’s plan to impose 25 percent tariffs on imported automobiles represents the latest in a series of blows to American EV-makers, who were already struggling with the president’s promise to scrap EV subsidies, roll back vehicle emissions standards and pause federal funding for charging infrastructure.
Analysts said tariffs are a setback to the automotive industry at large, with higher import duties driving up the cost of gas-powered and electric vehicles alike. But they are a gut punch for EVs in particular, which have been racing to become cost competitive with their gas-powered brethren.
“I think they interrupt the progress,” said Stephanie Valdez Streaty, an analyst who tracks the industry at Cox Automotive. “Anything that’s going to potentially increase the price of a vehicle comes out of consumers’ pocket. It’s just going to hurt overall.”
At the same time as tariffs wound the overall EV market, they could provide a window of opportunity for automakers that already produce EVs and batteries domestically and could beat competitors on price. The most likely winner is Tesla, analysts said, though other automakers could also benefit.
The average price for an EV was $55,273 in February, compared to $47,555 for a gas- or diesel-powered vehicle, according to Cox Automotive. Biden-era EV tax credits of $7,500 per vehicle have helped close that gap.
Electric vehicle sales were not as robust last year as analysts and automakers expected, but the industry continued to grow. EV sales hit a record in 2024, growing more than 7 percent over 2023 levels, and ended the year on a high note. Sales in the last three months of 2024 were 15 percent higher than the same time period the year prior. The momentum carried over into 2025. February sales were up 10.5 percent over the same month in 2024, even though they declined slightly from January levels, according to Cox.
The tariffs leave automakers’ EV plans exposed in several ways. Their big batteries mean that their supply chains are rooted in China, meaning Trump’s new tariff regimes will raise their costs. And since most automakers still lose money on every EV they make, they have every incentive to turn to their traditional, internal-combustion vehicles, where there is at least the chance of making a profit.
“It will further reduce their interest in talking about electrics because they’re not making money on those vehicles,” said Alan Baum, an independent auto analyst based in Detroit.
Imports accounted for at least 15 percent of U.S. electric vehicle sales in 2024, according to an review of Kelley Blue Book sales data by POLITICO’s E&E News.
Among the vehicles summoned from abroad were the Chevrolet Blazer, Chevrolet Equinox and Honda Prologue, which are all made at the same plant in Mexico; Ford’s Mach-E, which is assembled in Mexico; BMW’s entire line of U.S.-sold electric vehicle models, which are made in Germany; the Hyundai Kona, which is made in South Korea; and Volvo’s EX30, which is made in Belgium.
Taken together, imports rose to at least 20 percent of EV sales in the fourth quarter of 2024.
Many auto analysts saw the Prologue, Equinox and Ford’s Mach-E, which debuted in 2020, as the next step in America’s EV evolution: crossover vehicles popular with American consumers that were cost competitive with their fossil fuel counterparts.
But the future of those models, and EVs more broadly, has been clouded by Trump’s actions. The president has paused funding for electric vehicle charging infrastructure, promised to roll back vehicle emission standards and targeted tax credits that lowered the cost of EVs for consumers, said Cox Automotive’s Valdez Streaty.
How Tesla could win
Some automakers could stand to win the long game if Trump’s tariffs stand for his entire term.
The EV-maker most likely to benefit most from tariffs — or suffer the least — is Tesla, the company whose CEO, Elon Musk, is now Trump’s most powerful ally in dismantling federal agencies and shrinking the civil workforce.
Tesla is least exposed to tariffs because nearly every U.S. vehicle it sells is made domestically. At least 70 percent of the components used in the company’s Model 3 and Model Y, Tesla’s best selling vehicles, are made in the U.S. and Canada, according to National Highway Traffic Safety Administration figures from October. (In a sign of how much the world has changed in recent months, the figures do not distinguish between components made in the U.S. and Canada.)
After Trump announced his tariffs, Musk was quick to point out that even Tesla would suffer because like any automaker, many of its parts come from abroad.
“The cost impact is not trivial,” Musk said on X, the social media platform he also owns.
Tesla has seen its market share steadily drop in the last six months — a trend that appears to be accelerating as Musk becomes more controversial in his new political role. Tesla vehicles, dealerships and charging stations have been targeted by protesters, with some instances of vandalism and arson.
Whether or not Trump took into account Musk’s auto fortunes, the new tariffs could make it easier for Tesla to beat its EV rivals on price, which could reverse its sales decline.
“Do we see a world in two years where Tesla is back to being the dominant seller of EVs?” said Karl Brauer, an auto analyst for iSeeCars.com, an auto sales site.
But even companies like Tesla that manufacture in the U.S. face threats from Trump’s push to impose tariffs on a wide-range of imported goods, analysts said. The president has imposed duties on steel and aluminum imports, prompting domestic steel makers to raise their prices, Valdez Streaty said.
The tariffs come on the heels of a preliminary determination from the International Trade Commission in February that concluded China engaged in dumping of graphite, a key material used in EV batteries. The commission is considering a 920 percent dumping duty on Chinese graphite imports, which could raise battery costs by 10 to 15 percent, Valdez Streaty said.
Musk’s relationship to Trump makes Tesla uniquely vulnerable to retaliation from China, said Andrew Gier, a trade analyst at Capstone. If China’s goal is to damage the Trump administration in its response to U.S. tariffs, it would make sense for the country to impose export restrictions on critical minerals like graphite.
“No one has the ability to do that like China,” he said.
The two H’s
A handful of traditional automakers could stand to gain from Trump’s tariffs because they have long laid plans to produce their EVs in the United States.
For example, Honda of Japan and Hyundai of Korea are among the automakers who started an expensive and long-term migration toward domestic EV manufacturing during the Biden administration.Such transitions take years, and they may soon bear fruit in ways that dodge Trump’s tariffs.
Before Trump won the election, Honda was already planning a $700 million renovation of its Ohio factories, alongside a new $4.4 billion battery plant. Honda’s renovation spending rose to $1 billion after Trump won office.
Today, the automaker’s only EV — the Prologue — ranked third in EV sales in the fourth quarter of 2024, eclipsed only by Tesla’s Model Y and Model 3. That model is a joint venture between Honda and GM and is made in Mexico, meaning it could be hit by tariffs. But later this year, Honda plans to start production of its first Honda-only EV, the Acura RSX, in Ohio.
Honda deferred comment to the Alliance for Automotive Innovation. The trade group did not immediately respond.
Another automaker that could end up ducking Trump’s tariffs is Hyundai.
Earlier this week, Hyundai Executive Chair Euisun Chung stood beside Trump at the White House to announce $21 billion of new U.S. investment. The move was an apparent attempt to convince the administration to not implement tariffs.
However, the basis for that infusion is a $7.5 billion factory in Georgia, dedicated to making EVs and hybrids, that the company put in motion during the Biden administration to take advantage of incentives in the Inflation Reduction Act. The factory officially opened Wednesday, the same day that Trump debuted his tariffs.
As recently as last year, more than 60 percent of Hyundai vehicles sold in the U.S. were imported, according to data from S&P Global Mobility. That stands to change as the automaker plans to almost double its annual production of U.S. vehicles to 1.2 million.
In some cases, automakers stand to benefit from past attempts to benefit from the IRA. Ford had been making the batteries for the Mach-E in Poland while the vehicle itself was assembled in Mexico. When asked about the potential impact of tariffs on the Mach-E, a Ford spokesperson pointed to a 2024 press release announcing the automaker’s decision to shift battery production from Poland to Michigan to qualify for IRA incentives.
“An affordable electric vehicle starts with an affordable battery,” Ford President and CEO Jim Farley said at the time. “If you are not competitive on battery cost, you are not competitive.”
This story also appears in Energywire.
Correction: An earlier version of this story incorrectly spelled Andrew Gier’s name.
