This article first appeared in The Edge Malaysia Weekly on July 14, 2025 - July 20, 2025

ONE of the more controversial pieces of US legislation in recent years went to the wire. In the end, US President Donald Trump was able to twist enough arms to get the Republican tax and spending cut-laden “One Big Beautiful Bill Act” through Congress on July 3, the eve of America’s Independence Day. The 900-page bill slashes a US$7,500 (RM31,900) incentive for new electric vehicles and plug-in hybrid vehicles as well as rebates for EV batteries while expanding incentives for fossil fuels. The bill’s passage also reopened the on-again, off-again rift between Trump and EV pioneer, Tesla Inc CEO Elon Musk, the world’s richest man who just weeks ago was being touted as the co-president.

Trump and his supporters have argued that Musk, who spent US$290 million of his own money to help the president get elected last November, has turned against the administration because the bill takes away subsidies for EVs, his flagship business. Musk, for his part, argues that Tesla no longer needs any rebates and that he opposed the “insane spending bill” because it backs old industries at the expense of new cutting-edge technologies, apart from adding another US$3.3 trillion to the burgeoning US$36 trillion US budget deficit over the next decade.

Just three years ago, EVs were the hottest thing around since the advent of smartphones 15 years earlier. Consultants and analysts were falling over themselves with outlandish projections of surging EV sales over the next decade. Boston Consulting Group went as far as to forecast that EV and hybrid vehicles sales would top 50% of total cars sold in the US by 2030. Auto consultancy JD Power estimated that America’s EV sales would grow to a more modest 36% of total car sales by the turn of the decade. Now, most forecasts of US EV sales have been slashed to between 20% and 25% of total US car sales by 2030.

Here is the latest state of play: US EV sales are projected to grow to 1.35 million this year, or just over 11% of total car sales in America in 2025. The forecast anticipates a huge boost in EV sales in the current quarter ahead of the expiry of a US$7,500 rebate that consumers can get for buying a new EV, or a credit of up to US$4,000 for eligible used EVs and hybrids, on Sept 30. Tesla, General Motors, Ford, Hyundai, Kia, Volkswagen and others are seeing increased demand for EVs from buyers who want to buy a car before EV rebates end and tariff-induced price hikes become effective. There are now over 6.6 million EVs on the road in the US, or under 3% of the total vehicles in America.

An average subcompact SUV, like the 2025 Hyundai Kona which runs on petrol, retails for between US$25,000 and US$32,000, depending on the model version and the bells and whistles it comes with. With new tariffs, US car prices are likely to go up between US$3,000 for a local subcompact and US$5,000 to US$7,000 for similar foreign cars. For EVs, add in an extra US$7,500 to the cost with the EV rebate elimination in September and you will start to understand why friends and neighbours across America are rushing to buy a car now.

Why did EVs derail even before they could really take off? For one thing, they are expensive. Indeed, the first Tesla Roadster, a two-seater sports car, rolled off the production line in 2008 around the time when oil prices shot up to a record US$147 a barrel. Benchmark WTI crude was selling around US$67 a barrel last week and edging lower. For another, despite billions spent on charging infrastructure, there are still not enough charging stations in the US and around the world. There is also range anxiety among new EV owners. How far can you go before you need to recharge again? Moreover, there is concern about EV battery degradation. Like smartphone batteries, EV batteries degrade over time. New EV owners also wonder how long it will be before their car’s expensive battery has to be replaced. The battery for the US$45,000 Tesla Model 3 EV costs around US$15,000. Normally, an EV battery should last up to 10 years or 100,000 miles. I know of one Tesla owner who bought a Model 3 about seven years ago and has been told he would need to replace his battery soon. He can’t sell his car because of the degraded battery. To keep his car going, he needs to invest up to US$15,000. If you were wondering, the petrol-based Hyundai Kona’s battery costs just 3% of the car’s retail price in San Francisco and they typically last three to four years.

The sticker price is still the biggest psychological hurdle for most EV buyers. A compact Hyundai or Kia EV in the US sells for about US$9,000 more than a comparable internal combustion engine model that uses petrol. Until Trump signed his “Big Bill” into law on July 4, the US$7,500 rebate was some consolation for those looking to make the switch from a petrol-based car. Still, a US$1,500 difference is often big enough to dissuade most cost-conscious buyers from taking the leap.

The switch to EVs, or electrification of transport, is important not just because clean energy vehicles are good for the environment, producing no tailpipe emissions, which lead to cleaner air, and cutting greenhouse gas emissions that contribute to climate change. EV buyers also save on fuel. EVs typically have around 20 or so moving parts, primarily in the electric motor, while internal combustion engine vehicles can have up to 2,000 moving parts in the engine, transmission and related systems. That means lower maintenance costs. Often if  something malfunctions, the factory can send a software update over the air that will fix it.

Here’s another reason why EVs matter: The key to EVs are the batteries, which can also be used in drones, eVTOLs or electric vertical take-off and landing aircraft, humanoid robots and other consumer electronics powered by artificial intelligence. To build a cost-effective battery supply chain, you need scale. If Americans buy a lot of EVs, there would be a big battery supply chain which, in turn, means it could make better and cheaper drones, humanoid robots, eVTOLs and a host of other AI-powered gadgets.

One reason why EVs are still expensive in the US is because EV makers, as well as the local EV battery supply chain, do not have the economies of scale that their counterparts in China have. A Tesla Model 3 costs US$45,000. BYD makes EVs in China that retail for less than half of that or around US$22,000. BYD and other Chinese EV makers like Geely Holdings, Wuling Motors and Xiaomi Corp have aggressively cut costs so much that they now make EVs for US$15,000 or even lower. Over the past month, Chinese EV makers have waged a “discount war” by slashing prices to boost demand. BYD makes its own batteries. Tesla, Xiaomi, Geely and niche players like Li Auto and Xpeng buy batteries from global EV battery giant Contemporary Amperex Technology Co Ltd (CATL).

For a decade now, Musk has promised a leaner, economical model of Tesla for US$25,000 and eventually make even cheaper cars to spur demand. A hundred years ago, Henry Ford had a similar strategy: Cut production costs to produce even more affordable cars for the masses. Musk, however, is now pivoting to driverless robotaxis instead of making EVs that are driven about an hour a day. The Tesla CEO’s aim is to shift from hardware sales of vehicles to boosting recurring revenue with software-like margins. Musk is also positioning Tesla as a leading builder of humanoid robots.

Global car sales grew 2% last year to 89 million vehicles. EVs accounted for just over 20% of that. In the US, EV sales made up just 10% of total car sales last year. In China, pure battery electric cars made up 27% of new car sales, hybrid electric cars made up 21% of total sales and petrol or diesel vehicles made up 52% of total car sales. Analysts expect total EV sales in China — both pure battery electric and hybrid — to top 60% of total car sales this year. Within the broader EV definition, battery electric cars are expected to account for two-thirds of the total EV sales in China in 2025.

China may be ground zero in transport electrification and EV sales but some countries in Europe are embracing clean energy cars as if their survival depends on them. Take Norway, for example. Battery electric vehicles (BEVs) made up 88.9% of new car registrations there last year, the highest share anywhere on earth. In the Netherlands, the share of battery EVs and plug-in hybrids climbed to 48.5% last year. In Germany, while sales of BEVs as a percentage of total car sales fell 27%, sales of plug-in hybrids grew 9% following the removal of EV rebates last year. Car buyers in France last year bought fewer EVs and plug-in hybrids but more traditional hybrids. While China and Norway are moving towards more BEV cars, in the rest of Asia and Europe, the preference is for traditional hybrids, with BEV cars playing a smaller role.

Two years ago, Japanese car makers such as Toyota and Honda were being criticised for missing the boat on EVs. As charging stations and range anxiety became major issues for car buyers, Toyota and Honda capitalised on this by rolling out more hybrids and a few plug-in hybrid models as well to satisfy demand. South Korean car makers Hyundai, and its affiliate Kia, have taken a different tack. They have aggressively introduced new BEV and plug-in hybrid models. South Korea is now the world’s ninth largest EV market while Japan, once a global auto powerhouse, is not even among the world’s top 10 EV markets.

There are a few lessons from the way the EV rollout has panned out so far. First, government regulation on clean energy vehicles is a huge driver of EV adoption. Secondly, until EV makers reach certain economies of scale, government rebates are needed to drive EV sales — but cash-strapped governments are withdrawing incentives for EVs, as the Trump administration is doing in the US and as its counterparts in Europe are doing. Thirdly, there is a need for governments and the private sector to partner in building charging infrastructure. Petrol-based cars have had a 100-year head start. There is a pump almost everywhere you go. Building adequate charging infrastructure will take time but as it is built out, more EV buyers will be convinced that they need to make the switch to electric.

EV makers like BYD, Tesla and others also need to build cars that offer a longer range. EVs with a 500km (310 miles) range are fairly common now. Some EVs with a range of 700km to 800km, including the Lucid Air Grand Touring, Mercedes EQS and Tesla Model S, are expected to be rolled out over the next six months. That will go some way in addressing EV buyers’ range anxiety. If your car can go 500 miles on a single charge, you really shouldn’t have too much to be anxious about. Charger compatibility was an issue a few years ago but that has been addressed, as you can now charge your GM, Ford or Hyundai EV at a Tesla charging station, or a Tesla at a charging station operated by EVgo, ChargePoint or Blink.

Trump’s tax and spending cut bill may have eliminated EV rebates but it is unlikely to push EV owners to go back to internal combustion cars. Improvements in battery technology will eventually cut costs further and advanced software, including autonomous driving, will lure more car buyers towards their first EV. Years from now, the lull in 2025 would be seen as just a small bump in the road for the boom in connected, electric, autonomous vehicles.

Assif Shameen is a technology and business writer based in North America 

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