Now that Election Day has come and gone, and the victor declared, I don’t mind saying that I’d had my eye on the 2024 Presidential Elections to see who would be controlling America and, more importantly, to me at least, how the results would impact the automotive industry. On November 6, 2024, Donald Trump was declared the winner of the 2024 Presidential Election and will become the 47th President of the United States when he is sworn in on January 20, 2025. His victory, and close association with Elon Musk, has led to a lot of speculation on the future of America’s automotive industry.
Escalating Tariffs on China
If you’re anyone related to the automotive industry, you’ll remember that back in 2016, when Trump was in the White House, a series of tariffs were imposed on auto parts and vehicles imported from China—25% on Chinese-made vehicles, including cars, trucks, and auto parts imported from China. In March 2018, this was expanded to include steel and aluminum imports as well—25% on steel and 10% on aluminum. The tariffs impacted all industries, including automotive. Fast-forward to 2024, and these have not only remained unchanged, but as of 2024, the Biden administration has announced plans to increase the tariff on electric vehicles imported from China from 25% to 100%.
The decision comes as part of a broader strategy to protect American industries and promote domestic manufacturing and is in response to China’s extensive subsidies and non-market practices, which have contributed to a 70% growth in Chinese EV exports from 2022 to 2023. Trump’s focus on making America great again—it was one of his campaign slogans along with ‘Made in America’—makes it very believable that his administration will maintain the current 100% tariff proposal on electric vehicles manufactured in China.
The Biden administration is also currently committed to enhancing local semiconductor production and strengthening the supply chain through the CHIPS and Science Act. This legislation represents an investment of USD 53 billion to bolster American semiconductor manufacturing capabilities, foster research and innovation, and develop a skilled workforce. The CHIPS and Science Act allocates USD 39 billion in direct incentives to construct, modernize, and expand semiconductor fabrication facilities. It also offers a 25% investment tax credit for semiconductor companies, encouraging further investment in domestic production. To ensure these investments are sustainable, Biden plans to raise the tariff rate on semiconductors from 25% to 50% by 2025, seen as a crucial step in promoting long-term viability for these initiatives. By increasing the tariff, Biden plans to protect domestic producers and ensure that investments in semiconductor manufacturing yield substantial benefits for the US economy.
Trump, however, based on his ongoing criticism of the CHIPS Act, which he labeled ineffective and detrimental to American interests, may consider reducing or even eliminating the USD 53 billion investment allocated under the CHIPS and Science Act, instead opting to increase the proposed 50% tariff on semiconductors.
Trump’s agenda prioritizes American manufacturing and eases business regulations, benefiting the automotive industry. His ‘America First’ trade stance includes increasing import tariffs to encourage foreign semiconductor companies to establish US-based factories. While the CHIPS Act faces challenges in execution, there’s concern that Trump 2.0 could undo efforts to establish semiconductor plants and jobs in the US, potentially jeopardizing years of progress.
Elon Musk: A Key Player in Trump’s Next Administration?
‘A star is born. Elon.’ Words straight from Trump’s victory speech. Welcome words, indeed, considering that Elon Musk spent over USD 120 million campaigning for ‘The Former Guy’. Trump’s victory puts Elon Musk in the right place at the right time, making him the prime choice for multiple influential roles within the upcoming Trump administration and potentially giving him the latitude to shape key policies in various sectors. One likely position being talked about is that of a technology advisor, which will allow him to focus on science and technology initiatives. Such a role would allow Musk to leverage his extensive experience in the tech industry to guide government policies that promote innovation and technological advancement. There is also talk of Musk being considered for the Secretary of Transportation or Secretary of Energy positions, where he will be able to advance his agenda related to solar energy and energy storage, aligning with his commitment to renewable energy solutions. Space policy is yet another potential area of involvement for Musk, where his leadership at SpaceX could provide valuable insights into national space initiatives. Musk’s expertise could also be utilized as a government economic advisor, where he would focus on strategies to reduce federal spending, though this seems unlikely. While his bold claim about being able to cut at least USD 2 trillion from the federal budget demonstrates his ambitious approach to government efficiency, the hassle and regulations associated with a full-time government position make it highly unlikely for him to consider an official role in Trump’s administration.
Irrespective of the role he takes up, I think we can expect Musk to push a couple of agendas—the biggest being federal approval for fully autonomous vehicles as opposed to state approval. He’s been after this since as far back as 2018, and now seems the perfect time to, well, create new policy. If he manages to get this particular ball rolling, it’ll open up some interesting clashes with California—I don’t imagine the Golden State will want to ease up on its requirements for driverless cars. A second area I think Musk will want to capitalize on will be his solar and energy storage business, which will help shift the focus from vehicle-related sales. However, with the bulk of his wealth coming from Tesla, getting legislation in place for federal approval of self-driving vehicles is his best bet, which will also boost his business.
In short, if he plays his cards right, Musk’s alignment with a Trump-led administration could not only drive Tesla’s competitive edge, regulatory ease, and expansion into new markets but also help Starlink reshape both US and global satellite and connectivity landscapes.
The Future of NEVI Funding
Trump’s contention is that the transition to EVs should be led by the private sector, including automakers and tech companies, rather than through government subsidies. To this end, he may consider cutting or redirecting funding for the National Electric Vehicle Infrastructure (NEVI) program, arguing that the federal government should not fund charging networks. It will be interesting to see how this plays out, given Elon Musk’s increasing proximity to Trump and the fact that Tesla utilized a significant portion of NEVI funding to expand its Supercharger network.
While Trump is likely to prioritize fossil fuels over green energy, he may not eliminate the NEVI program altogether. Instead, he may reduce federal funding for charging stations, with the saved funds being diverted toward other infrastructure projects, such as prioritizing natural gas stations or enhancing highways for traditional vehicles. Trump firmly believes that it’s not the federal government’s job to fund EV charging networks while the private sector leads the development of electric vehicle technology and infrastructure.
Here’s something else to think about: if Trump does reduce or eliminate incentives, Tesla will be the main winner. Its cost base and vehicle platforms allow it to sell EVs profitably, which might not be the case with other American and global OEMs, who will struggle to match EV and ICE vehicle pricing.
Trump 2.0 and the Inflation Reduction Act (IRA): What’s Likely to Change
Under the Trump administration, significant actions may be taken regarding the Inflation Reduction Act (IRA), including:
· Reduced or no subsidies for clean energy companies and consumers, particularly concerning EV tax credits and incentives
· Reduced investments in green energy infrastructure and climate-related research
· Reduced funding for projects involving the electric grid, battery storage solutions, and renewable energy
· Uncertainty on the funding of hydrogen and carbon capture and storage technologies
These actions would reflect a shift away from federal support for clean energy to prioritize traditional energy sources.
Revitalizing USMCA: Trump’s Plan to Reinforce Tariff with Mexico
The Trump administration plans to implement various tariffs on Mexico to strengthen the US-Mexico-Canada Agreement (USMCA). This approach aims to reinforce trade policies established during Trump’s presidency, ensuring that American interests are prioritized. By imposing tariffs, Trump seeks to create a more favorable trade environment for US manufacturers and reduce reliance on imports. One key area of focus is the automotive industry, where the agreement mandates that 75% of a vehicle’s components must be produced in North America to qualify for zero tariffs, an increase from 62.5% under NAFTA.
Conclusion
So, what will Trump 2.0 mean for America’s autos? Short-term relief from eased mandates and protectionist trade policies? Though this may be true to some extent, it will be at the expense of global competitiveness. For consumers, this could mean higher prices and limited options. Tesla’s advantage may grow, though resilience and adaptability will be crucial for industry survival.
