Trump Poised to Upend Biden's Electric Vehicle Policy: Reshaping the American Auto Landscape

Trump Poised to Upend Biden's Electric Vehicle Policy: Reshaping the American Auto LandscapeDuring his campaign for a second term as U.S

Trump Poised to Upend Biden's Electric Vehicle Policy: Reshaping the American Auto Landscape

During his campaign for a second term as U.S. president, Donald Trump repeatedly pledged to overturn the legal and regulatory frameworks pushed by incumbent President Joe Biden, aimed at reshaping America's electric vehicle and battery industries. If he gains congressional support, Trump could take the following steps to launch a full-scale challenge to the Biden administration's EV policy, potentially triggering a major shift in the American automotive landscape.

Trump's Policy Outlook: Reversing Biden's Green New Deal

Trump's EV policy objectives are clear: dismantle Biden's policy initiatives, revitalize the American automotive industry, and entice Chinese electric vehicle manufacturers with more favorable policies. His potential actions include:

• Revoking Electric Vehicle Sales Targets: Repealing Biden's requirement that two-thirds of new car sales in 2032 must be electric vehicles. Trump argues that this is too aggressive, unaffordable for consumers, and will not meet market demand.

• Eliminating or Reducing Tax Credits: Eliminating or reducing the existing $7,500 tax credit for purchasing or leasing new electric vehicles. Trump maintains that this policy exacerbates the federal deficit and has not effectively promoted electric vehicle market development.

• Curtailing Government Subsidies: Reclaiming billions of dollars in unused grants and loans allocated to battery and electric vehicle companies. Trump contends that this money has been wasted on unnecessary projects and should be prioritized elsewhere.

China-US Electric Vehicle Competition: How Trump Will Respond?

Trump might take a fluctuating stance towards China's electric vehicle industry. He has promised to impose a 60% tariff on all Chinese goods, significantly higher than the rates during Biden's administration. However, he has also invited Chinese electric vehicle manufacturers to build factories in the U.S., provided they employ American workers.

This position contrasts with the Biden administration's EV policy, which has effectively blocked imports of Chinese-made electric vehicles and batteries, prioritizing the development of a domestic electric vehicle industry in America. Industry experts widely concur that, aside from Tesla, Western automakers struggle to compete with Chinese counterparts in terms of technology and cost.

Elon Musk, CEO of Tesla and a key Trump supporter, has warned of the threat posed by Chinese electric vehicles. In January of last year, he stated, "Frankly, if trade barriers aren't put up, Chinese carmakers will destroy most of the other car companies in the world."

Trump's Policy Foundation: Repealing the Inflation Reduction Act

Trump's electric vehicle policy is tightly intertwined with his broader economic strategy. He has repeatedly threatened to repeal the landmark Biden-backed Inflation Reduction Act. Passed by Congress in August 2022, this act aims to reduce America's greenhouse gas emissions through subsidies and tax credits, including a $7,500 tax credit for consumers buying electric vehicles. The law also imposes restrictions on the proportion of Chinese-made materials used in vehicles, with these limitations gradually tightening.

Trump has fiercely denounced the act as a "scam" and a waste of money, claiming it will not reduce inflation as its name suggests. He has vowed to repeal it on his first day in office and reclaim any unused funds.

Industry Perspectives: Trump's Policies May Garner Partial Support

Trump's policies may garner support from certain sectors of the industry. Jack Hollis, chief operating officer of Toyota North America, has stated, "The development of the electric vehicle ecosystem is ahead of consumer demand and is completely out of step with the consumer's reality."

Industry insiders believe that Trump could also urge Congress to repeal the $7,500 tax credit included in the Inflation Reduction Act, which would make it harder for electric vehicles to sell, as they are generally more expensive than comparable gasoline-powered models. Despite Tesla benefiting from electric vehicle subsidies, Musk has long criticized these subsidies, arguing that they only exacerbate the federal deficit.

Republicans remain unhappy that Democrats drafted and passed the act without their consent, although it is unclear whether they would have supported the legislation if they had been involved. Nick Loris, vice president of the think tank C3Solutions, remarked, "Republicans ultimately felt like they were manipulated, regardless of whether or not they agree with the policy. They tend to remember these things."

Trump's Refined Measures: Adjusting Subsidy and Loan Programs

Trump could also eliminate or reduce the production tax credit included in the Inflation Reduction Act. This credit aims to subsidize the construction of electric vehicle and battery material processing plants, enabling them to better compete with Chinese rivals.

Ben Steinberg, executive vice president of the battery industry lobbying group VennStrategies, suggests that Trump may not abolish the production tax credit, as most projects receiving the credit are located in counties and states controlled by Republicans. However, Trump could potentially adjust the eligibility criteria for these credits, favoring projects related to critical mineral mining, nuclear energy, and fossil fuel initiatives like carbon capture technologies. Currently, the credit primarily benefits battery and critical mineral processing plants.

During his first term, Trump attempted to eliminate the Department of Energy's Loan Programs Office but was unsuccessful. Now, he might pursue its abolition or freezing of operations once more. If the office is retained, Trump could restrict its loans to projects favored by him, such as those in the mineral and nuclear power sectors.

Trump could also suspend the $6 billion in grants allocated to battery and mineral processing companies under the Bipartisan Infrastructure Law. Although the Department of Energy has announced funding for over 30 companies, the actual disbursement of funds has been slow, and many award-winning companies havent yet signed final contracts. While Trump has not indicated his intention to cancel these appropriations, industry analysts believe that he is unlikely to revoke funding for projects with signed contracts.

The Department of Energy's Advanced Research Projects Agency-Energy (ARPA-E), responsible for incubating next-generation energy technologies, could face the risk of being dismantled again. Trump tried to abolish the agency during his first term but was thwarted by Congress; he might reintroduce this initiative and redirect its $450 million budget to other projects.

Trump's Unexpected Move: Openness Towards Chinese EV Manufacturers

Trump's openness to Chinese car manufacturers producing electric vehicles in the U.S. stems partly from his reluctance to be perceived as exploited. Reports suggest that Chinese car manufacturers might establish factories in Mexico to leverage the tax-free export of electric vehicles to the U.S. under the USMCA agreement, prompting Trump's response.

Loris underscores, "Consumer interests need to be considered in major trade negotiations. The persistent impact of inflation has become a significant focus in this election. Imposing tariffs and restrictions on essential imported goods, including batteries and electric vehicles, would only inflate consumer costs with negligible benefits for national security."

Conclusion: Trump's Policies Could Trigger a Major Shift in the American Automotive Industry

Trump's planned electric vehicle policies would have a profound impact on the American automotive industry. He could repeal Biden administration policies, revive the American automotive industry, and lure Chinese electric vehicle manufacturers with more favorable policies. This move would initiate a major restructuring of the American automotive landscape and potentially influence global electric vehicle market trends.

However, Trump's policies face numerous challenges. Whether he can secure congressional support and how to balance the development of domestic industries with international trade relations are concerns that warrant attention. Ultimately, the implementation of Trump's electric vehicle policies remains to be seen.