At a speech in Detroit on Thursday, Donald Trump, Republican nominee for President in the upcoming election, focused on the US auto industry. In it he outlined some of the plans should he be successful in November, this included greater R&D tax credits for businesses as well as making the interest on car loans fully deductible.
Alongside these more concrete policies, Trump reiterated how overseas manufacturing has damaged the US auto industry and doubled down on a promise of increased tariffs, as well as promising to open the USMCA trade deal for renegotiation; particularly to protect the US from other countries using Mexico to “smuggle their products into the United States tax free”.
Trump also touched on electrification, broadly rallying against EVs though again reiterating he is a fan, and that they have their place in the market. Particularly praising Elon Musk’s Tesla products. Despite this he rallied against the “insane electric vehicle mandate” which is “killing the US auto industry”, vowing to terminate this. He also suggested changes to the IRA clean vehicle tax credit, reversing its “injustice”.

Trump unveils new policies for the automotive industry
The headline announcement from the speech was certainly the new tax break on car loan interest, making interest payments fully deductible is an extremely significant benefit. Using today’s average transaction price in the US of USD48,397 this could be worth between USD2,300 for the most favourable credit, and over USD8,500 over a typical six-year loan period given today’s average auto loan rates of between 6% and 20% APR.
That equates to a significant saving and will likely incentivise many to go for a new vehicle compared to a used vehicle or hanging on to their current vehicle. While the measure is not specifically targeted at any particular technology, given higher prices of BEVs compared to ICE vehicles in the US, this may have an important impact on those deciding whether to make the switch to EV or not.
Tax support for businesses announced is also a big incentive. Trump stated that US based car makers will gain expanded research and development tax credits, “able to write off 100% of their cost of heavy machinery and other equipment necessary to build a plant in the first year.”
This is a crucial benefit if Trump’s core vision for the auto industry is to be realised. Earlier in the speech Trump made it clear the goal is for manufacturing to take place in America, saying “I want German car companies to become American car companies, I want them to build plants in America.” This message was echoed on the topic of Tariffs, bluntly stating “because when foreign leaders and CEOs call me up to complain about our tariffs my answer will be very simple Build it in America, you don’t have any tariffs, build it right here in Detroit.”
READ: US Election 2024: Political uncertainly leaves EV and battery industry unsure
Trump’s stance on tariffs
Reciprocity was a key theme on the subject of tariffs, making it clear that Trump feels the US has been unfairly treated in trade with other nations, particularly highlighting relationships with China, India, Korea and of course Mexico. He repeated the discussion around Chinese manufacturers taking auto production to Mexico “China is currently building gigantic Auto plants in Mexico, and they think that they’re going to sell all of these cars into the United States which would destroy Michigan totally.” While many Chinese OEMs have taken an interest in Mexico, at Rho Motion we don’t believe the end goal is necessarily the US market, Mexico and other markets in South America have shown an early desire to purchase Chinese cars, BYD has recently raised its goal for EV sales in Mexico next year to 100,000 units.
However, Trump announced he will formally notify Mexico and Canada of intentions to invoke the six-year renegotiation provisions of the USMCA. The core motivation appearing to be to prevent trans-shipping through Mexico and into the US.
Given tariffs on BEV imports from China have recently been raised from 27.5% imposed by Trump to 100% under President Biden, preventing an easy circumvention through Mexico would be a logical move for either administration to pursue. The US market currently does not import any significant volume of BEVs from China, so preventing this from starting is not expected to be a detriment on the progress of that market.
Electrification not a focus, but mentioned multiple times
While not the focus of the speech, electrification did come up at multiple points. Once again however the terminology and promises made were not always 100% clear, raising doubts about current policies without specifics.
Trump said: “I will start by terminating K’s insane electric vehicle mandate on day one. It’s killing our car industry; Kamala’s EV mandate is killing the US Auto industry. It requires that within just a few years 67% of all new cars and trucks must be electric.”
It has been unclear previously whether the EV mandate Trump is referring to is the EPA emissions standards or the California Air Resources Board Advanced Clean Cars II (ACCII). The prior had the latest rule from 2027-2032 finalised this year, in this ruling the EPA’s own analysis of its central case projected that in 2032 69% of Light Duty Vehicles would be EVs (56% BEV and 13% PHEV) in 2032.
Alternatively, ACCII lays out a “ZEV percentage requirement” which equates to 68% in 2030 for Passenger Cars and Light-Duty Trucks, rising to 100% in 2035.
The prior has effect nationally, but the latter is more reflective of the phrase “ZEV Mandate” given the EPA sets no technology-specific requirements. EPA emissions have also been rewritten frequently in the past, being rewritten by both the Trump and Biden administrations, and with executive orders a feasible power to begin the rewriting process we believe the EPA emissions standards are the more likely target for Trump here.
Trump also commented on the Clean Vehicle Tax credit brought in via the Inflation Reduction Act (IRA). This grants consumers up to USD7,500 for a qualifying vehicle. Trump highlighted that EVs are causing the price of entry level ICE vehicles to be raised in order to balance profit margins as EVs typically are still less profitable for most manufacturers. However, he then went on to say, “Kamala gives rich people $7,500 tax breaks to buy luxury electric cars, a lot of people don’t know that, yet she makes the working class pay more for a entry level car that’s powered by gasoline” despite the fact these tax credits are limited to consumers under certain income limits and for vehicles below certain MSRPs. He goes on to indicate taking action on this by saying “I will reverse also this injustice on day one.”
It is not clear whether this is an indication the tax credits are in sight for overhaul, or whether this is a continuation of the plan to terminate the ‘EV Mandate’.
Mixed scepticism about autonomous vehicles
Trump highlighted his endorsement from Elon Musk at points in the speech, referencing the unveiling of Tesla’s new Robotaxi product as well, on the same day as this speech. Later however, Trump seemed to be more sceptical, saying “autonomous vehicles… when you see a car driving along, I don’t know a little concerning to me, but the autonomous vehicles, we’re going to stop from operating on American roads – remember this I will close the loopholes under Biden and Harris that are beginning to allow Chinese vehicles to creep into American streets.”
Again, highlighting the lack of clarity from some quarters. We don’t yet know of any Chinese vehicles operating autonomously in the US, instead these have so far come from the likes of GM, Google and Tesla themselves.
Expectations for a Trump win
In conversation with the industry, it is clear that beyond anything else the key thing everybody is looking for is certainty. Announcing policies focused on the auto industry that give indication of support such as the tax breaks announced in this speech are a positive sign for US automakers, and do not necessarily preclude progress on electrification. However, unclear and imprecise discussions of changes to current policies does little to provide certainty.
Recent analysis from Rho Motion, presented at its North America event in Ohio, presented four scenarios on election outcomes and the impact on EV battery demand in the US. The most restrictive of these scenarios expects dramatic overhauls to the IRA, EPA emissions legislation as well as taking aim at the California Air Resources Board ACCII, among other things. It is a combination of all the most drastic measures that have been floated. Trump’s Detroit speech did little to take any of these actions off the table, however the additional measures proposed provide some clear upside to a Trump election victory which was previously lacking.
More Information
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Image credits: Adobe stock, Congress Library