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Presidential election a fork in the road for automakers' EV plans

Grant Schwab and Breana Noble, The Detroit News on

Published in Business News

DETROIT — Depending on whom Americans elect to the presidency in November, the U.S. auto industry could be looking at two vastly different product and profitability scenarios.

As a result, the industry is holding its breath. The Biden administration last year proposed stricter emissions regulations into the next decade, suggesting EV penetration would need to be close to 60% by 2030 for manufacturers to comply. A forecast from business analysis firm GlobalData Plc expects even under that scenario, EV adoption would be around 48% by 2030, while it might be more like 32% under former President Donald Trump, who has promised to strip back requirements and revoke California’s waiver to set its own rules if he returns to the White House.

“Over the last decade or so, CO2 legislation has become such a divisive topic between Republicans and Democrats,” GlobalData forecaster Kevin Riddell said. “Having an inconsistent policy makes it tougher for the OEMs and suppliers to plan for all for this, to bring the economies up, and to start actually making profit off these things.”

Disagreements on policies that encourage EV adoption have been fodder for attacks between the candidates. Trump calls President Joe Biden's proposed emissions rules an "EV mandate" that will kill jobs because EVs have fewer parts and consumers aren't ready to switch. Biden says if Trump were to roll back standards, the United States would lose auto jobs to China and face negative climate impacts.

Another Biden term would pressure automakers to invest in more EV capacity and battery production as well as pursue low-cost EVs, especially in light of increasing foreign competition and consumer hesitation, Riddell said. To what extent will depend on the final rules expected out next month, though reports suggest the planned 2030 targets will be pushed out.

Meanwhile, a second Trump administration would bring greater profitability for automakers, Riddell said. Based on already-announced investments, the EV sales mix will increase. But with less regulatory pressure, traditional automakers could lean on their profitable internal combustion engine vehicles for longer, producing more tailpipe emissions.

 

One thing is certain: A majority of Americans aren't buying EVs. Fully electric models represented 7.6% of new vehicle sales in the U.S. last year, up from 5.9% in 2022, according to Kelley Blue Book estimates. That growth, though, is slowing, as consumers are reluctant to pay the premium prices early adopters have been.

The average transaction price on a new EV last year was more than $61,700 compared to $47,450 for other models, excluding any applied consumer incentives, according to auto information website Edmunds.com Inc. Automakers late last year announced EV-related capacity cuts, nixed programs and delayed launches.

"You need an ecosystem for this to work,” said Sam Abuelsamid, principal e-mobility analyst at market research firm Guidehouse Inc. “You can't just build the vehicles and hope for the best. You actually have to address every aspect of that ecosystem — charging, the battery manufacturing, the mineral sourcing, the whole supply chain, and the recycling at end of life.”

The lack of that developed ecosystem — for now — is why the U.S. has not had a “hockey stick” moment in EV adoption, Abuelsamid said, referring to a growth curve that starts slow before soaring upward. In certain parts of the country, it could take years before charging infrastructure, affordability, desirable EV products and electricity from emissions-free sources align.

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