By Karl Doenges
What does the new administration mean for the convenience retail industry, whose business model is built to a large part around the vehicle and mobility? To explore this, let’s take a look at some of the things the Trump administration might attempt to change or (has already changed) and how these efforts might play out for the market.
Executive Order Summary
President Trump issued numerous executive orders on January 20 laying out his goals and changes (actual and possible) to various programs affecting EV’s and EV charging. They are as follows:
- Pause funds disbursed through the Inflation Reduction Act of 2022 (this includes funds for EV charging in the National Electric Vehicle Infrastructure Formula Program (NEVI) and the Charging and Fueling Infrastructure Discretionary Grant Program (CFI))
- Within 90 days all agency heads shall submit a report to the Director of NEC and OMB regarding their policy change recommendations to be in line with this executive order
- Considering the elimination of … subsidies and other … government imposed market distortions …. This might include CAFE standards and California’s independent rules and regulations in regards to the Clean Air Act
- Renegotiate the USMCA with Canada and Mexico, which might affect vehicle manufacturing and import/exports, and use tariffs – possibly at a 25% rate starting February 1 - to incentivize movement on negotiation
Department of Government Efficiency (DOGE)
President Trump tapped Elon Musk and Vivek Ramaswamy to run a new advisory group to help reduce the size of the federal government, although Ramaswamy has since left to run for governor of Ohio. The DOGE seeks to save the U.S. $500 billion per year by identifying executive action that can remove regulations that were enacted without specific Congressional authorization. The President-elect has set a target to remove 10 regulations for every new one enacted, and the DOGE is tasked with recommending regulations for repeal. Which regulations will find their way onto the recommended list is yet to be seen, but general expectations are the list will be very extensive.
The President has already issued dozens of executive orders. You can see them here.
Musk and Ramaswamy have pointed to two recent Supreme Court cases they believe give them some leverage in their mission:
- West Virginia vs EPA, which found federal agencies cannot enact regulations with major economic or policy questions without specific direction from Congress
- Loper Bright vs Raimondo, which overturned the Chevron Doctrine and found that federal courts should not defer to federal agencies’ interpretation of law or own rulemaking authority and that such authority is reserved for Congress.
CAFE and Tailpipe Rules
The most recent corporate average fuel economy (CAFE) and greenhouse gas tailpipe regulations issued by President Biden’s Environmental Protection Agency (EPA) set very stringent tailpipe emissions which de facto pushed EVs and alternative fuels. Most analysts believe that EVs would have to comprise 67% of sales by 2032 to satisfy the requirements. The Trump administration could roll these back, but enacting such changes takes time. During the first Trump Administration, the Environmental Protection Agency took more than three years to change the CAFE provisions, and the Biden Administration then took another three years to change them again. In addition, other programs like California’s low carbon fuels standard (LCFS) and Advanced Clean Car rule (see below) could mitigate the impact a change in CAFE would have on the market.
One executive order, “Unleashing American Energy,” states that “It is the policy of the United States” to “eliminate the electric vehicle (EV) mandate.”
California Independence
This leads to the next likely move from the Trump administration – attempting to claw back the authority given to California under the Clean Air Act to set its own emissions standards to deal with pollution. It is unknown specifically how the Supreme Court will look at this, but the argument is that carbon regulations are targeted at climate change, which is global, and thus under the purview of the federal government, not state governments. This would get to the upcoming California ICE ban and low carbon fuels standard. The EPA at the end of December approved CA’s Advanced Clean Car Rule, which bans the sale of new internal combustion engine vehicles (ICEV) in 2035. Under another provision of the Clean Air Act, states are permitted to opt into California’s regulatory structure. The map below shows which states are following California’s policy to ban ICEV sales.
Vehicle Tax Credit (without the rest of the IRA)
One area that is a likely target of the Trump administration is the $7,500 tax credit for purchasing an EV, which is a part of the Inflation Reduction Act (IRA). It is less complicated to undo this as opposed to other legislatively enacted funding programs such as the National Electric Vehicle Infrastructure (NEVI) Funding Program. However, without a filibuster proof Republican majority in the Senate, this would most likely happen through a budget reconciliation process that is not subject to a filibuster.
This would not be completed until the second half of 2025, most likely, and it is never a fast process. Even then, with the slim majority in the House, unity among Republicans will be critical. The irony is that Biden used the budget reconciliation process to circumvent Republicans and get the IRA passed. While this course of action is reasonably possible, it won’t happen fast and there will be plenty of notice for the market before it is completed.
Tariffs
The Trump administration will use tariffs, particularly against China. The stated goal of the Trump administration is not to have tariffs as the norm or to be a primary source of revenue generation, but rather as a tool to effect change and achieve a more balanced reciprocal trade relationship. The exception to this is anything deemed to be a national security risk, with foreign reliance being seen as an unacceptable vulnerability. This could be a key issue for access to minerals necessary for battery production, and as we have already seen, reliable supply of semiconductors. Likely transportation-related targets include Chinese EV and battery manufacturers as well as manufacturers in Mexico that are subsidized by Chinese companies or using subsidized Chinese parts and components. The effect of tariffs is dependent on whether the targeted countries negotiate and make changes to their behavior. The obvious result of tariffs would be to increase prices for U.S. consumers, but they could also spur domestic production and create new jobs. As mentioned above – Trump is considering a 25% tariff on Mexico and Canada which might begin February 1st.
Paris Climate Agreement
The Trump administration has pulled out of this agreement. Like the last time the Trump administration pulled out, many larger global corporations will most likely keep their emission targets in place and many other countries will stay in the agreement. The overall impact of such a move on vehicle and energy production could be limited because most of the companies engaged in these sectors operate on a global scale, must comply with regulations in other countries and serve consumer needs in many different markets. This reality could also limit the impact of rolling back some of the EV incentives the Administration may seek to target.
NEVI and CFI (IIJA)
The Infrastructure and Jobs Act (IIJA) authorizes $7.5 billion in funding and consists of the NEVI program at $5 billion and Charging and Fueling Infrastructure (CFI) Grant Program at $2.5 billion. NEVI and CFI are designed to promote the deployment of EV charging infrastructure. While formula funding that’s been apportioned (NEVI) can’t be clawed back easily, the Trump administration can more easily target discretionary funding (CFI) and seek to delay or suspend distribution of funds. However, such a move might meet with Congressional resistance because states that more heavily supported Republican candidates (i.e., Red States) have received a significant share of these grants and their representatives and Senators may resist cutting off their constituents who benefit from these resources. There will be more clarity on these programs after the 90 day reporting requirement from the Executive Order is due.
IRA (without vehicle tax credit)
The Inflation Reduction Act (IRA) was directly authorized by Congress and is very difficult to repeal – but, easier than NEVI funding. Much of the IRA funding is provided via discretionary grants as opposed to the NEVI process, which is block funding to states that can’t be undone easily. Billions of dollars of IRA funds have yet to be obligated, and it is possible for the incoming Administration to rescind or reallocate these unobligated funds, but anything that supports the domestic production of batteries and vehicles could be left alone. Additionally, there is the 1974 Impoundment Control Act, which states Presidents can’t ignore Congressional spending decisions in favor of their own. As mentioned above – the budget reconciliation process would be the most likely tool to attack the IRA.
Autonomous Vehicles
This is not an issue that is staring the U.S. in the face right now – but it is coming, and many companies have spent significant funds to develop this technology. At a minimum the technology push is already resulting in major advancements in advanced driver assistance systems (ADAS). If vehicle autonomy reaches the full design capabilities of autonomous robotaxis, this could have a significant impact on the convenience retail industry and how they sell to the “driving” public. A possibility (particularly in light of Elon Musk’s relationship with President-elect Trump) is a federalization of autonomy standards and rules. It is unknown if they would be more or less strict but having one set of rules could simplify efforts and speed up deployment of this technology.
Karl Doenges represents the National Association of Convenience Stores (NACS) on the coming disruption in mobility and how that effects retailers. Karl is also the Executive Director of the Transportation Energy Institute (TEI) Charging Analytics Program.