Carmakers have warned that tearing up the Inflation Reduction Act will hurt the growth of US electric vehicle sales, after former president Donald Trump’s advisers revealed plans to gut the country’s cornerstone green legislation if he is elected.

The IRA is intended to drive EV manufacturing in the US by offering consumer incentives if they buy battery cars where certain parts are sourced from the US or its trading partners.

The measure, which is intended to dissuade consumers from buying Chinese technology, has sparked tens of billions of dollars of investment into the US from battery and auto groups.  

But in November, Trump’s senior campaign officials and advisers told the Financial Times that he was planning to overhaul US policy during a second term. As the growth of EV sales slow, and carmakers pull back on some spending plans, industry executives now fear that without the incentives EV sales will stumble.

General Motors chief financial officer Paul Jacobson said the IRA had “tremendous benefit” to the EV market, helping stimulate sales. “We don’t want to end up saying this vehicle program is really good with the IRA, only to have the IRA go away, and now suddenly, the vehicle can’t make money.”

Nissan chief executive Makoto Uchida, whose carmaker has two plants in the US and who previously said “the world needs to move on” from internal combustion engines, said that the measures helped drive EV sales in the country “in the medium to long term”. 

He stressed he did not want to comment on the politics of the measure, but added that the “penetration of EVs will be much more promising with that kind of act”. 

EVs made up 9 per cent of all new vehicle sales in the first nine months of 2023, according to data group BloombergNEF. The Biden administration wants electric vehicles to reach 50 per cent of all new sales by the end of the decade.

Across the world, EV sales are still rising, although largely in areas that have generous incentives. However, rates of growth are slowing in large markets, including the US and Europe, as mass-market buyers remain sceptical of EVs’ higher prices and perceived inconveniences, such as charging.

In the US, the generous tax credits offered to consumers who buy EVs and to domestic manufacturers have helped carmakers increase their EV offerings. The companies are conscious that watering down the programme will also make it harder to sell the vehicles profitably. 

Analysts, meanwhile, warned that Trump’s plans have increased investment risks for foreign companies.

Troy Stangarone, senior director at the Korea Economic Institute of America, said that Korean companies, which have invested billions into the US, had already made their “long-term strategic bet” on the US EV transition before the IRA was passed.

But he noted that “some of the additional investment we’ve seen over the past year is clearly tied to an expectation that the IRA would drive the transition to EVs more quickly than perhaps prior investments would have anticipated.

“Now with EV sales not growing as quickly as people thought they would, some of these Korean investments are being pared back.”

As non-Chinese companies that stand to benefit from the IRA’s restrictions on Chinese sourcing, Korean battery makers LG Energy Solution, SK On and Samsung SDI have all set up North American joint ventures with US carmakers. Hyundai is building a $5.5bn EV and battery plant in the US state of Georgia, the largest economic development project in the state’s history.

However, Tim Bush, a Seoul-based EV analyst for UBS, added that the Korean battery firms had always planned for the possibility the credits would be withdrawn earlier than the legislation presently envisages.

“The Koreans don’t take it as a base case that the [incentives] will be uncapped and available until 2032,” said Bush, noting the credit was the element of the IRA most likely to be targeted by a future Republican administration.

Stangarone said that in the event the IRA’s provisions were struck down by a Trump presidency, Republican politicians would have to explain themselves to voters in the red states that have received the most IRA-related investment.

He added: “The question any Trump administration will have to face is: do they really want to be the authors of the downfall of the US auto industry?”