Our view
Increasingly, investors have become more constructive on the EV slowdown in the US, especially when putting things in context. Regarding the 2024 US elections, most are concerned with the uncertainty and unpredictability of a Trump administration but agree that both candidates would be protectionist.
Chinese BEVs should not be a threat to US autos near term. Also, many observers believe that OEMs might be intentionally keeping production lower to manage dealer inventories.
Signaling protectionist
Both candidates have signaled they would be protectionist on BEV sales from China and on sourcing batteries from China. Biden imposed a 100% tariff and Trump countered with a 200% proposal. Biden also has a 25% tariff on batteries coming from China. Both candidates also seem open to loosening emissions rules and targets.
Uncertainty and unpredictability
From conversations we have had with companies in our coverage, the concern has more to do with uncertainty and unpredictability in a Trump administration, rather than fears that either will be more protectionist. For example, in 2019, Trump’s tariff threats on Canadian raw materials (like aluminum) caused a great deal of angst in the Autos complex, as did threats to impose tariffs on European cars. Would a second Trump administration do more of the same?
Neutering the IRA
Companies want to know what to expect to happen, so they can plan accordingly. It is the uncertainty that is the problem, not necessarily the policy. Trump might try to neuter the IRA, but we think a full scale cancellation would be unlikely. First, most domestic battery production happens in Republican districts. Secondly, the IRA is already law, and undoing it would be politically difficult. He could go after the commercial lease loophole where OEMs qualify for the $7,500 credit despite sourcing batteries from China. Both candidates could also further strengthen foreign entities of concern rules, which could make it harder for EVs to qualify for that same credit.
