Electric Vehicle Industry Navigates Uncertain Landscape Amidst Trump's Presidency

The US automotive industry faces ongoing challenges following a pandemic-induced surge. The incoming Trump administration adds to this uncertainty, potentially impacting the sector's electric vehicle (EV) growth trajectory.

Mixed Signals on Electrification

Major automakers such as General Motors (GM) and Ford (F) have scaled back their EV ambitions due to waning demand projections. President-elect Trump's stance on electrification remains ambiguous, despite his reported close association with Tesla CEO Elon Musk. While he has expressed support for EVs, Trump has also voiced concerns about their range, cost, and manufacturing location in China.

Policy Changes Anticipated

Trump's policies are expected to include the rollback of President Biden's stringent emissions targets for automakers and the $7,500 federal EV tax credit. While Tesla has benefited from these incentives, Musk has surprisingly supported their removal, arguing that it would ultimately benefit the company.

Impact on Legacy Automakers

Ford and GM rely heavily on the EV tax credit to keep retail prices competitive. Its removal could hinder their EV sales and profitability. Joseph Shapiro, an economics professor at UC Berkeley, emphasizes the significance of the $7,500 incentive.

Supply Chain Concerns

The pandemic-era inventory surge has left automakers struggling to manage their stock levels. High interest rates and escalating sticker prices have further pressured dealers. Stellantis, the parent company of Jeep, Dodge, and Ram Trucks, has been actively reducing its inventory.

Tariff Threats Complicate Production

Trump's proposed tariffs on imports from key trading partners, including Canada and Mexico, could further disrupt production. S&P Global estimates that automakers could lose up to 17% of their annual core profits if tariffs are implemented. GM and Ford have significant manufacturing operations in Mexico, increasing their exposure to potential penalties.

Potential Upsides

Despite the uncertainties, there may be some positives for the auto sector under a Trump presidency. Ford executive chairman Bill Ford has suggested that Trump's understanding of the industry has improved since his first term. However, it remains to be seen how the president-elect's policies and rhetoric will ultimately impact the automotive landscape.