Trump's Return to the White House Could Cause a "Shock" to the US Electric Vehicle Industry

Trump's Return to the White House Could Cause a "Shock" to the US Electric Vehicle IndustryThe US electric vehicle industry could face a turbulent period after former President Donald Trump defeated incumbent Vice President Kamala Harris in the presidential election. Trump's Republican Party has historically been critical of electric vehicles, arguing they are a forced choice for consumers

Trump's Return to the White House Could Cause a "Shock" to the US Electric Vehicle Industry

The US electric vehicle industry could face a turbulent period after former President Donald Trump defeated incumbent Vice President Kamala Harris in the presidential election. Trump's Republican Party has historically been critical of electric vehicles, arguing they are a forced choice for consumers. Trump has vowed to repeal or weaken numerous automotive emissions standards put forth by the EPA, as well as to dismantle the Biden administration's 2022 Inflation Reduction Act, which included incentives for auto production and adoption.

Industry insiders and other officials note that while Trump may struggle to fully repeal the Inflation Reduction Act, he could curtail or restrict electric vehicle subsidies through executive orders or other policy maneuvers. Predictions point to Trump potentially targeting the current $7,500 federal consumer tax credit for EVs, rather than the production subsidies for companies.

David Rubenstein, co-founder and co-chairman of The Carlyle Group, stated that the Inflation Reduction Act may see adjustments, but it is unlikely to be entirely scrapped. He argues: "There are some things in there that were bipartisan and positive, and I think both Republicans and Democrats will like it." The Inflation Reduction Act has directed substantial investments in electric vehicle production to Republican-controlled states like Ohio, South Carolina, and Georgia.

Automotive industry executives have swiftly asserted that their investment decisions are not entirely contingent on who occupies the White House, but a new administration naturally leads to some strategic adjustments. David Christ, vice president and general manager at Toyota North America, mentioned at a recent Automotive Press Association event near Detroit: "Transitions for the industry are always eventful because we have to adapt to new policies and regulations, and we have to educate the new administrations about who we are and what we do. They happen about every four years, so we don't make big adjustments to our strategy because of that."

Winners and Losers?

Several Wall Street analysts speculate that traditional automakers, particularly the Detroit-based General Motors, Ford Motor, and Stellantis (the parent company of Chrysler), could benefit during a second Trump term and a Republican-controlled Congress. John Murphy, an analyst at Bank of America Securities, noted in a Wednesday investor report: "We believe Ford and GM would be the primary beneficiaries of a Trump administration's policies. Current EPA regulations require traditional automakers (including autos and trucks) to decarbonize their core businesses by 2020, and accelerate the transition toward electric vehicle product lines."

General Motors' ambition to achieve a "fully electric future" and profitability in the short term heavily relies on federal tax incentives. Analysts had predicted that EV startups like Rivian and Lucid could receive more support if the Democrats won the election. However, with potential cuts or elimination of EV subsidies, Toyota could emerge as a winner, given its more cautious investment in pure electric models compared to hybrids.

On Wednesday, General Motors and Ford Motor shares jumped 2.5% and 5.6%, respectively. Toyota and Stellantis shares remained relatively flat. Stellantis has faced notable challenges in the US market. In contrast, Lucid and Rivian share prices tumbled 5.3% and 8.3%, respectively.

Tesla, the leader in the US electric vehicle market, stands as an exception. CEO Elon Musk actively campaigned for Trump in several swing states, and Trump has previously discussed appointing the billionaire to oversee government efficiency. Tesla shares surged 15% on Wednesday, hitting a 52-week high earlier in the day. Bank of America Securities analyst John Murphy stated: "The challenges facing Lucid and Rivian are largely reflected in the stock market. We don't expect Tesla to face significant difficulties as it has achieved profitability and plans to introduce more mass-market entry-level products."

Following the announcement of Trump's victory by several US media outlets, the aforementioned automakers did not immediately respond to requests for comment. However, Detroit's automakers, as well as Hyundai, extended congratulations to Trump and newly elected officials at various levels. Ford issued a statement saying: "We look forward to working with the new administration and Congress on policies that strengthen the American auto industry. The auto industry creates 9.7 million jobs in the US and contributes over $1 trillion in revenue to the economy every year."

General Motors stated: "We congratulate the president-elect, the Congress, and all elected officials and look forward to working with them to ensure that the US remains a leader in technology and innovation for the benefit of American workers and consumers."

California's EV Regulations

Trump is anticipated to once again clash with California and other states that have enacted independent emissions standards, which include hard quotas for the sale of all-electric vehicles. Under the California Advanced Clean Cars II (ACCII) regulations implemented in 2022, 35% of the new models launched next year, starting with the 2026 model year, must be zero-emission vehicles encompassing pure battery electrics, fuel-cell vehicles, and plug-in hybrids.

Prior to the election, automotive industry insiders revealed that regardless of who ultimately occupied the White House, many automakers would seek to postpone the implementation of these regulations. The California Air Resources Board (CARB) notes that 12 states and the District of Columbia have adopted these regulations, but half of them plan to begin implementation with the 2027 model year. This is part of the Advanced Clean Car program, which mandates that all new car sales in California be 100% zero-emission by 2035.

However, data from the Alliance for Automotive Innovation, an industry association and lobbying group representing most major automakers operating in the US, indicates that as of early this year, only 11 states and the District of Columbia had reached or surpassed a 10% market share for electric vehicles.

Furthermore, automotive executives and industry experts predict that Trump may repeal or freeze the Corporate Average Fuel Economy (CAFE) standards for model years 2027 through 2031.

Conclusion

Trump's return to the White House could have a significant impact on the US electric vehicle industry, potentially leading to major changes in policies and regulations. Traditional automakers could benefit from Trump's policies, while EV startups may face greater challenges. California's electric vehicle regulations could also face challenges during Trump's second term.

Ultimately, the precise impact of Trump's policies on the US electric vehicle industry remains to be seen. However, one thing is clear: the industry will face an environment fraught with uncertainty and challenges in the years to come.