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With the US elections approaching in November, the clean tech industry faces significant uncertainty. As previously reported, politics can greatly influence the energy transition. The polls show the runoff between Donald Trump and Presumed Candidate Kamala Harris will be a close one. A Harris presidency would be more predictable, while a Trump presidency leaves many uncertain. How will this election affect the industry across the US?
Tesla
Tesla, the vanguard of the US EV industry, would presumably be thought to be the first to back a Democrat presidency likely to continue support for EVs. At the end of July, Tesla delayed the construction of its Mexico plant until after the election due to the potential impact of a Trump presidency. Trump has suggested imposing tariffs on EVs from Mexico, which could greatly affect Tesla’s value proposition for the plant. Additionally, Trump has vowed to “end the EV mandate,” potentially referring to the EPA emissions legislation for vehicles made between 2027 and 2032, or the California Advanced Clean Cars Act II. This caused Tesla’s share price to drop 4% in one day, though in reality this represents a standard daily movement for the highly volatile stock.
However, Tesla’s CEO, Elon Musk, supports Trump, recently stating that he considers the Republican party “the party of meritocracy” and “personal freedom.” Musk has established a super PAC to support the Trump campaign with USD45 million a month. In addition, on Tesla’s recent earnings call, Musk referred to a Trump victory as being “devastating for our competitors” but only “slightly” for Tesla while long terms it “probably actually helps Tesla”. Could part of Musk’s motivation to back the Republicans be to position Tesla in the least-worst yet still-winning position in North America?
Other Players Reconsidering Plans
Tesla is not alone in reconsidering expansion plans until after the election. Several European clean energy companies are openly delaying expansion in the US, with many others likely reconsidering plans behind closed doors. Peter Roessner, CEO of hydrogen firm H2Apex, voiced a common sentiment: “With a Donald Trump who A) is very opportunistic, B) is also very polemic and C) is also fairly unpredictable, you have to ask yourself whether it makes sense to make such a bet.”
Are the IRA and BIL at risk with a Trump Presidency?
A Harris presidency would ultimately continue Biden’s legacy, including the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), both of which provide strong support development and deployment of clean energy technology. Trump has openly criticised the IRA and lobbied lawmakers to abandon the BIL when it was first introduced. A Trump presidency would likely attempt to reverse or reduce these laws. While it is unlikely that the IRA and BIL could be fully repealed without significant Republican control of both the House and the Senate, Trump could still jeopardise the incentives they offer. However, republican states such as Georgia, Arizona and Texas have been strong beneficiaries to the IRA, so there may be division in the party over support for the legislation.
At Benchmark Mineral Intelligence’s recent Washington conference, representatives from Volkswagen Group, Samsung SDI, and Kore Power all expressed concern that Sections 30D (the consumer tax credit of up to USD7,500 for the purchase of an EV) and 45X (the manufacturing tax credit for companies establishing facilities in the US) of the IRA could be in danger if Trump wins, leaving multi-billion-dollar investments uncertain.
In LG Energy Solution’s Q2 earnings call, the company revealed it would have recorded a KRW253 billion (USD182 million) operating loss without the IRA tax credit. Instead, it registered a KRW193 billion (USD139 million) profit, demonstrating the credit’s importance to the company’s revenues.
The EPA Emissions Legislation
Trump reversed the Environmental Protection Agency’s (EPA) emissions legislation during his previous term, and he would likely do the same again. The EPA legislation recently confirmed under the Biden administration set emissions standards for model years 2027-2032, requiring fleet average emissions low enough that selling some level of ZEVs is the only feasible route to compliance. A Harris presidency would continue with these targets and likely introduce further targets for 2032 and beyond within the next term, aligning with the current administration’s aim of 50% EV sales penetration by 2030.
Both GM and Ford, giants of the US auto industry, in their Q2 earning calls avoided what a Trump presidency may mean for them. However, they did hint they had been advising Republicans not to undermine their EV efforts.
Rho Motion’s Evaluation, The Outlook for the US EV and Battery Industry
Ultimately this election remains firmly in the balance and statements surrounding this industry have been vague at best, doing nothing to bring the certainty many are looking for.
Presently, the Rho Motion EV forecast predicts that by 2030, just over 40% of US passenger car and light-duty vehicle sales will be electric vehicles (both BEVs and PHEVs). However, under a Republican presidency, this percentage would likely decrease. While a Republican presidency could impact the energy transition in terms of vehicle sales, the future trend remains towards electrification. Government support is crucial for helping industries commercialise and achieve strong profitability during this transition.
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