The U.S. electric vehicle (EV) market, which accounted for about 8% of new car sales in 2024, is now confronting new challenges due to the recent imposition of tariffs that are affecting global supply chains and increasing manufacturing costs. These developments come at a time when automakers are already navigating the complexities of building a domestic EV ecosystem.
In recent years, consumer interest in EVs has been driven by federal tax credits and the growing availability of electric models from traditional manufacturers such as Ford, Chevrolet, and Hyundai. Tesla remains the market leader with a 48% share, although competition has steadily grown. Despite this momentum, the average EV price remains significantly higher than that of gasoline-powered vehicles, further adding to affordability concerns.
The new tariffs are expected to raise the cost of critical components, many of which are sourced from international markets, including China. These include essential materials for batteries and various electronic parts. As automakers work to localize production to meet federal incentives and maintain eligibility for EV-related benefits, the tariffs are creating additional cost pressures.
Manufacturers may now have to reassess their production targets and investment plans. Some are expected to scale back EV production in favor of more profitable gasoline vehicles, especially as financial returns on EVs remain limited. The used car market, often seen as a refuge for cost-conscious buyers, is unlikely to provide much relief due to limited EV inventory.
The current uncertainty is influencing long-term planning in the automotive sector. Industry groups have expressed concern about the impact of tariffs on both job creation and economic growth in communities that are investing in EV-related infrastructure and manufacturing.
Overall, the path to widespread EV adoption in the U.S. may face delays as the industry adjusts to shifting trade policies and rising production costs.
This ripple effect is not limited to the U.S. market alone. Commenting on the broader implications, Pratik Kamdar, CEO and Co-Founder of Neuron Energy, notes: “We stand at a pivotal moment today where India has the opportunity to become self-reliant and battery-efficient by scaling up local manufacturing capacity. Maharashtra, being a key EV hub, can attract investments from companies that are looking to reduce their import dependency on the U.S. The 26% tariff on auto components announced by the U.S. government poses significant challenges for Indian EV manufacturers, especially those who are sourcing critical components like battery cells from the U.S. The double duty charges on import and export will lead to increased production costs, impact affordability, and slow the adoption. However, the Indian government’s support through the FAME scheme, the PLI program, and incentives for local battery production will be instrumental in mitigating the impact. To ensure long-term sustainability, we must diversify our sourcing strategies and tap into emerging markets across Europe, Southeast Asia, and the Middle East. This shift could ultimately strengthen India’s auto ecosystem and position it as an attractive destination for global manufacturers aligned with the Make in India and Aatmanirbhar Bharat vision.”
