Carmakers fret over Trump threat to EV subsidies
Does Donald Trump really want to be responsible for the downfall of the US auto industry?
That’s the question posed by some analysts in our report today highlighting fears among carmakers that Trump’s intention to gut Joe Biden’s cornerstone green energy legislation — the Inflation Reduction Act — could undermine electric vehicle sales and investment should he reascend to the presidency in November.
The IRA aims to drive domestic EV manufacturing by offering American consumers incentives if they buy battery cars with parts supplied from the US or its trading partners, rather than turning to Chinese competitors — a threat underlined by new data showing China’s BYD has overtaken Tesla as the world’s biggest EV maker.
But with Chinese battery makers accounting for more than two-thirds of the world’s supply and China controlling two-thirds of lithium refining capacity, government restrictions come at a cost to American carmakers, which face an expensive shift to South Korean and Japanese suppliers. The new rules introduced on Monday could also hit EV take-up: the number of car models eligible for US tax credits is now down from 43 to 19.
EV sales are still rising across the world, mainly in areas that have generous incentives, although growth is slowing in large markets such as the US over concerns about prices and charging.
In the meantime, BYD and other Chinese manufacturers have been leveraging their country’s control over the production of almost all the necessary resources, material and components needed for EVs. BYD for example controls mines as well as producing batteries and chips.
EV progress among legacy carmakers is patchy. The most promising recent development has been the announcement from Toyota — still the world’s top selling carmaker — that the mass production of solid-state batteries is within reach.
At policy level, the EU is still working out ways to rival the US subsidies, which are drawing battery companies across the Atlantic and slowing progress towards China-free supply chains, despite hopes that €3bn in financial support would help jump start a domestic industry.
Back in the US, some believe Trump is unlikely to follow up on his threat to withdraw incentives for one simple reason: Republican-voting states have been the biggest beneficiaries of investment.