President Trump’s invoices for imported cars and car accessories could stop the development of electric vehicles, setting a critical technology to tackle climate change.
But invoices could also operate in favor of certain electrical models in the United States, such as the Tesla Model Y or the Volkswagen ID.4, which are among cars with the least imported parts and therefore the least vulnerable to invoices.
Invoices could lead to sharp increases in the cost of batteries and other accessories. With the damage to electric vehicles in the United States, invoices could also give more ground to Chinese automakers that have a substantial lead.
One thing is clear: invoices will increase prices for all vehicles – gasoline, electric or hybrid – and could lead to serious shortage of accessories if some suppliers are out of business. There will be wavy results that no one can predict. However, vehicles submitted to lower invoices could have a competitive advantage.
EV supply chains may be easier to review
Electric vehicles have much fewer parts than gasoline or diesel -operated cars. Theoretically, it should be easier for highways to come from the United States, avoiding invoices.
Efforts to create a domestic supply chain for electric vehicles are in progress, partly due to Biden’s management policies that provided loans and subsidies to battery factories and other projects.
LG Energy Solution, a South Korean battery manufacturer, manages three batteries in the United States they provide to General Motors and other customers. Three more LG plants will begin to produce batteries next year and one seventh is designed.
“The capacity is there and now we manage to increase the size of the market,” Robert Lee, North America president at LG Energy Solution, said in a recent interview.
The problem is that many raw materials of the battery come from China and can face hard invoices. For example, China dominates the supply of refined toner, a key ingredient in most electric vehicles.
US companies work for the production of toner, lithium and other basic materials. But it will be several years before these businesses can replace Chinese suppliers.
Some EK is already the most American
All cars sold by Tesla in the United States are manufactured in California or Texas. Last year, Tesla’s Model Y Sport Utility, who uses the data submitted by automakers to the federal government and other sources to rank vehicles depending on the amount of their content and their work coming from the United States.
Tesla uses some parts of Mexico and China to be subject to invoices, but less than other automakers. This gives the Y model, Tesla’s most popular vehicle, a cost advantage that could limit the price gap with conventional cars. On average, electric vehicles selling prices are more than $ 12,000 more than comparable vehicles with internal combustion engines, according to Cox Automotive.
“We have identified supply chains both in America, Europe and China,” said Elon Musk, Tesla’s chief executive, at a teleconference with analysts and investors. “So this puts us in a stronger position than our competitors.”
Another vehicle relatively insulated by invoices is the Volkswagen ID.4, an electric power vehicle manufactured in Tennessee with a battery from agriculture.
“It’s not bad thought,” said Kjell Gruner, president of America’s Volkswagen team, said last week when a journalist asked if ID.4 could win a competitive advantage.
But he added that finding the final impact on the invoices was extremely difficult, because many variables were ongoing and because Mr Trump’s commercial policies were often changed. Mr Gruner said he started every day with a meeting with other executives to discuss the latest developments.
“You need to consider your entire chain of value, from logistics to construction, supplies, sales and marketing,” Mr Gruner said. “You need to get into weeds.”
Mr Musk warned that the invoices would also be bad for Tesla and said he failed to talk to them.
Automakers may favor more profitable gasoline vehicles
In addition to Tesla, most manufacturers do not make much or money in electric vehicles. Car manufacturers can decide to limit the production of these cars and focus on benzines and sports vehicles that are usually very profitable.
The danger is that, by delaying the growth of electric vehicles, US highways will lose their ability to compete with the Chinese, the South Korean and the European automaker that extend their electrical lines. It is close to unanimity in the industry that sooner or later electric vehicles will become more popular than cars with internal combustion engines.
“It is difficult to understand how you eliminate the huge costs that may be linked to invoices with the need to continue investing in the future,” said John Bozzella, president of the Automotive Innovation Alliance, an industry union.
Some invoices will fall harder on the EK
Electric vehicles usually have more semiconductors than internal combustion engines and will be hit harder than invoices in chips marked by Mr Trump.
Some invoices may also apply to charging equipment, which could slow down the recent rapid stations growth where people can connect vehicles. The fear that he is unable to find a charger has kept many people from buying electric vehicles.
Most electric vehicles use magnets that contain rare land, which will be incomplete, due to restrictions that China recently imposed on retaliation on US invoices.
Crunch Rare Earths will probably come in the second half of the year, Neha Mukherjee said, will lead analyst Rare Earths to Benchmark Mineral Intelligence.
“There are already stocks on the market that can be enough for now,” Ms Mukherjee said. If the restrictions continue, he said, “we’ll see prices hit higher.”
