The major concerns are around whether Trump will repeal the US Inflation Reduction Act (IRA), which was implemented to support the development of the EV and battery sectors within the US and instead deliver the 60% tariff hikes he has previously promised to impose on Chinese’ imports, sources said.
“Trump repealing the IRA will slow demand for EVs and halt the development of the battery raw materials’ supply chain, which might pose a challenge to Chinese EV and battery producers if fully implemented,” an EV producer based in China told Fastmarkets.
Trump had vowed to change the US energy policies and repeal the green subsidies offered by the IRA before he was elected for a second presidential term. Under the IRA, there are currently consumer tax credits of up to $7,500 for new EVs and up to $4,000 for used EVs.
But some Chinese producers said they had became less concerned about Trump making changes to the IRA after Tesla’s owner Elon Musk’s endorsement of the president-elect.
“It seems unlikely that Trump will actually repeal the IRA given Tesla’s large EV market share. Also, Tesla still relies heavily on China for the supply of raw materials and EV production,” a major battery producer in China told Fastmarkets.
And there are plenty of reasons to leave the IRA in place, sources said.
“Repealing the IRA could face bipartisan resistance in the US, [with] both the Democrats and Republicans seeing huge economic growth spurred by investments in the EV and battery sectors [because of the Act],” an industry analyst said.
A double-edged sword?
Despite the cautiously optimistic outlook for China’s EV industry under Trump’s second presidency, Chinese producers said they are still worried about the impact of potential tariff hikes under Trump.
Aimed at supporting the US domestic EV supply chain, the White House announced in May that import tariffs on EVs from China would rise from 25% to 100%, while tariffs on lithium-ion EV batteries would increase from 7.5% to 25%.
Trump said before his election triumph that he would raise tariffs on goods from China to at least 60% to protect and boost US manufacturing industry.
“We believe Trump’s policies will hurt China’s export volumes in general, which are crucial to China’s economic growth,” a major Chinese battery producer said.
But the producer added that such a potential tariff hike could be a double-edged sword for Trump, because raising taxes on foreign goods will also lead to higher inflation in the US.
Tariff hikes might also spur China to strengthen cooperation with other regions in the world, a second battery producer source said.
“China has already shifted focus to regions such as Southeast Asia, to countries such as Indonesia and Vietnam,” the source said. “Besides, if Trump actually increases tariffs to 60% or above, it might spur Chinese producers to localize manufacturing within the US,”
Chinese EV producers such as BYD have been expanding their presence in Southeast Asia via raising their production capabilities in countries including Indonesia and Vietnam.
BYD officially opened its first sales showroom in Vietnam on July 18, with the launch of three models.
On June 14, Indonesia said that it plans to produce 600,000 EVs by 2030 via partnerships with four Chinese EV companies – Neta, Wuling, Chery and Sokon – to build an EV production and export hub in the country, according to Indonesia’s Industry Minister Agus Gumiwang Kartasasmita.
But some Chinese EV producers remain bearish on the industry outlook following Trump’s success in the US election.
“Trump being president increases the uncertainty, given his unpredictability,” a Chinese EV producer source told Fastmarkets. “And neither [of the US presidential candidates] would roll out policies that benefit China’s EV makers.
“The growth rate of EV demand has already been slowing and the battery market currently faces oversupply, which might lead to further production cuts anyway,” the source added.
Discover how the 2024 US election is impacting and could impact US and global commodity markets with Fastmarkets. Head to our US election hub.
