As Donald Trump made his victory speech after Iowa’s caucuses, the front-runner in the 2024 Republican presidential primary couldn’t resist taking a shot at electric vehicles while praising a supporter from Missouri.
That supporter “comes all the way from Missouri, which isn’t that far. You can’t drive an electric car that far though,” the former president said Monday night, drawing laughs from his audience in Des Moines.
It’s the type of criticism of EVs that Trump has offered often during his 2024 White House campaign, showing a clear repudiation of President Joe Biden’s approach. The Democratic incumbent has made support for EVs DRIV KARS a key part of his speeches and his economic policies, saying the car industry’s future “is electric, and there’s no turning back.”
From MarketWatch’s archives (September 2023): Trump attacks Biden over EVs as he makes pitch to auto workers
So the result of the 2024 presidential race, which looks likely to be a Biden-Trump rematch, is expected to have an outsize impact on the Biden administration’s incentives and regulations that aim to boost adoption of EVs. The election has been described as a “referendum” on EVs by analysts at Beacon Policy Advisors, even as they acknowledge the issue won’t drive voters as much as top-tier topics such as inflation or abortion rights.
“It’s not necessarily what people are going to be voting on, but the future of EVs is nevertheless very election-dependent on what happens in 2024,” Beacon analyst Maxwell Shulman said.
There are expectations that widely used tax credits that can take as much as $ 7,500 off the cost of a new EV will be targeted by Trump or any Republican president — especially if the GOP keeps its grip on the U.S. House of Representatives and takes back the Senate. The credits already have been pared back as of Jan. 1, with some car models losing out due to new anti-China rules for battery materials. They could be reduced further after the 2024 elections, as even Democratic-run chambers of Congress might support closing a “leasing loophole.”
Washington will have to decide in 2025 on how much of Trump’s 2017 tax overhaul should be extended vs. allowed to expire. If Republicans are in control of the White House and both chambers of Congress, they’re likely to look during that process at the EV credits, established by Biden’s Inflation Reduction Act, according to Beacon’s Shulman.
“If you’re going to do tax cuts, you need the revenue offset from somewhere, and what’s better than the marquee legislative package that your opponents passed the prior term?” he said.
Related: As Biden touts his Inflation Reduction Act, analysts size up how Trump might repeal it
Courtney Rosenberger Gelman, managing director of policy research at Strategas Securities, said the EV tax credits are “the most at risk” part of Biden’s Inflation Reduction Act, if Republicans score wins in the 2024 elections. She said she thinks it’s going too far to say this fall’s voting in the U.S. looks like a referendum on EVs, but it does have the potential to have an impact on the growing industry.
Democratic control of one chamber of Congress probably would prevent a full rollback of the EV tax credit, but there still could be changes, according to Gelman. “Even with Democrats, because of how bipartisan going after China is,” there could be additional sourcing requirements, she said. And with “continuously building populist momentum on both sides of the aisle, things like the leasing loophole could be targeted,” she said.
That loophole refers to how it’s possible to get $ 7,500 off any EV at any price if it’s leased, with no limits on the driver’s income level. For buying rather than leasing, the subsidy comes with more rules, such as an income cap of $ 150,000 for individual tax filers buying new vehicles, as well as North American sourcing.
Beyond the EV tax credit, Beacon’s Shulman expects a Republican administration would aim to roll back Biden regulations such as a proposed tailpipe-emissions rule that’s intended to push all-electric options to making up as many as two out of every three new passenger vehicles sold in the U.S. by 2032.
The GOP-run House passed a bill in December on that exact issue, with Republican lawmakers describing Biden’s rule as an EV mandate, but it’s not expected to find any traction this year in the Democratic-controlled Senate.
Forecasts for the EV industry’s growth would have to get reduced if such regulations got nixed in 2025, because it’s not only carrots or subsidies that would go away, “but also because the sticks forcing industry in that way are sort of getting removed as well,” Shulman said.
Companies ‘can’t make a long-term investment plan’
The share of U.S. car sales that are EVs is likely to be 8% in 2024, up from 6.9% in the first 11 months of 2023, according to Jessica Caldwell, head of insights at Edmunds. She describes the market for the vehicles as experiencing a “wake-up call” after earlier projections proved too optimistic, with some of the struggles coming from elevated interest rates for auto loans.
Losing the $ 7,500 EV tax credit would be a hit to the industry, especially as buyers now are no longer as likely to be early adopters, she said. “It definitely would affect it, just because if we are going to more of a mass-market consumer, that person has a lower income level than an early adopter, generally speaking.”
Related: Hertz cites weak demand, high damage costs in decision to downsize EV fleet
Car makers and their allies have indicated they’re tracking the political risks. The CEO of Chrysler and Fiat parent Stellantis STLA, -2.18%, Carlos Tavares, recently told Automobilwoche that the U.S. elections are important, and his company may have to change its strategy “if political and public opinion tends toward fewer EVs.” In a similar vein, executives from General Motors GM, -0.93% and Nissan 7201, -0.98% told the Financial Times that eliminating incentives would hurt EV sales.
“What I worry about the most on behalf of American business is just the lack of certainty,” said the U.S. Chamber of Commerce’s president and CEO, Suzanne Clark, during a news conference last week when she was asked about repealing parts of the Inflation Reduction Act.
“This every two or four years having a big guardrail-to-guardrail shift means we’re seeing companies say, ‘I don’t know how to invest in the United States. I can’t make a long-term investment plan.’”
Related: Both Trump and Biden ‘threatening for the markets’, says Ray Dalio
Voters show big partisan divide on EVs
While there’s a war of words over EVs between Biden and Trump, there also appears to be a partisan divide over these products between rank-and-file Democrats and Republicans.
Some 71% of GOP voters say they would not buy an EV, according to a Gallup poll conducted last year. Among Democrats, only 17% feel that way, and among independent voters, it’s 38%.
To be sure, Gallup has noted that Americans aren’t the best always forecasters for what they’ll end up buying, as nearly a quarter of respondents to a 2000 survey said they would never buy a cellphone. What’s more, while an E&E News tally last year showed that members of Congress with EVs are overwhelmingly Democrats, GOP Rep. Thomas Massie of Kentucky has said he was the first U.S. lawmaker to have a Tesla TSLA, -3.07% on Capitol Hill, as he got one of Elon Musk’s products a decade ago.
Still, what gives with the party split on EVs?
“I think it comes down to partisan viewpoints on energy XLE generally, where Republicans are generally more pro-fossil fuel RB00, +0.02%, and Democrats have been generally viewed as anti-drilling, anti-oil CL00, -0.41%, anti-coal,” said Gelman at Strategas.
Green-energy stocks ICLN could end up tracking Democratic prospects in the 2024 elections, according to Gelman.
“You’re going to see EVs and other renewable-energy names potentially trading off of the odds of Republicans vs. Democrats doing well in the election,” she said. She noted that her shop found that type of relationship ahead of the 2022 midterm elections, as shown in the chart above.
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