Is Trump a Threat to US Electric Vehicle and Battery Supply Chain Growth?

How would a Trump presidency impact the EV sector?

As the US election approaches, with Republican candidate Donald Trump set to square off against Democrat Kamala Harris on November 5, speculation is rife about whether Trump would end EV incentives.

In an August 20 interview with Reuters, the presidential candidate expressed his disdain for tax incentives.

"Tax credits and tax incentives are not generally a very good thing," Trump said. "I'm not making any final decisions on (EV tax credits). I'm a big fan of electric cars, but I'm a fan of gasoline-propelled cars, and also hybrids and whatever else happens to come along."

However, battery sector experts at Fastmarkets' Lithium Supply and Battery Raw Materials conference agreed it would be extremely difficult for Trump to repeal any or all of the three initiatives.

“What can Trump legally change if he becomes president with the IRA?” Grace Asenov, base metals and energy editor at Fastmarkets asked rhetorically during her presentation at the event. “The quick answer is he is not going to be able to change very much. The IRA is law; anything that the treasury department does through regulation can be changed, but it would take a lot of time, and it would have to be done in a legally defensible way."

Even so, analysts at the Fastmarkets event believe that while changing the IRA and other legislation would be difficult, a Trump presidency would have a negative impact on EV sector growth. During a scenario analysis, they concluded that another Trump term could have three major implications for EV battery-related policies.

First, Trump may impose stricter regulations on which EV models qualify for subsidies under the IRA, limiting eligibility for the US$7,500 tax credit. Second, his administration could eliminate Environmental Protection Agency vehicle emission standards that are expected to lead to 67 percent of vehicles being electric by 2032. Lastly, Trump might roll back commitments for 50 percent of the government fleet to be electric by 2030.

“If implemented, these changes could result in 5 percent lower EV sales by 2034,” Asenov said.

How could the IRA be improved?

With the outcome of the US election still very much up in the air, the Fastmarkets experts spent time sharing ideas on how the IRA and other legislation in the country could be changed for the better.

Steve LeVine, editor of the Electric, would like to see some collaborative measures implemented.

“Who's the world expert in making batteries and making the chemicals, making the components? It is the Chinese. So if I were to change any part of the IRA, it would be an incentive to bring Chinese expertise into the US to teach Americans how to do that," he told attendees at the Fastmarkets event.

Asenov noted that Trump could look to close the US$7,500 credit loophole for leased vehicles through which consumers can lease an EV, get the incentive and then return the car after three years.

For his part, Klein said he would like to see more investment in mineral extraction and production.

“More money for mining. There is a lot of funding in the IRA, but no money for mining, just processing,” he said.

Klein went on to note that allocating money for mining could “change the mentality” around the sector and send a positive message to the public about the often-maligned industry. Whether added to the IRA or adopted as standalone investment, the need to secure new and grow existing mined supply is a crucial first step in EV sector growth.

Indeed, the International Energy Agency notes that demand for minerals used in EVs and battery storage is set to grow at least 30 times by 2040 in climate-driven scenarios.

While investment in new mine supply, processing and manufacturing were agreed to be imperative, where that money comes from caused some division amongst the panelists.

As Klein called for IRA funding, David Deckelbaum, analyst at TD Cowen, took a more “cynical view” of the IRA.

“I don't think (the IRA is) very pragmatic,” he said. “My criticism would be, especially as you look at the capital flows and attracting capital and investments, investors do not want to invest in something that requires infinite supplementation.”

Deckelbaum went on to explain that he agreed with LeVine’s point, and suggested removing China from the "economy of concern" list to allow materials from China to qualify for investment tax credits.

This would also involve increasing consumer credits and eliminating income limits to boost adoption.

"We should focus on creating demand domestically, rather than imposing restrictions on how manufacturers meet it. Since it's not feasible to avoid buying materials from China, and investors are reluctant to support companies that can't compete without government aid, the current approach isn't sustainable," he said.