TL/DR –
Automakers have expressed concern that changes to the Inflation Reduction Act (IRA) could hinder the growth of electric vehicle (EV) sales in the US. The IRA, which offers consumer incentives for purchasing EVs that use parts sourced from the US or its trading partners, has stimulated significant investment into the US from battery and auto groups, but former President Donald Trump’s advisers have revealed plans to overhaul the policy if he is re-elected. Industry figures fear that without these incentives, EV sales could falter, especially as sales growth slows and manufacturers cut back on spending.
US Electric Vehicle Sales Could Suffer if Inflation Reduction Act Is Overturned
Automakers have expressed concern about the future of US electric vehicle sales, following revelations of plans to dismantle the Inflation Reduction Act if former president Donald Trump is re-elected. These plans could hinder the growth of the US electric vehicle market, a critical segment of the green economy.
The IRA, a key policy in supporting EV manufacturing in the US, offers incentives to consumers who purchase battery cars made with parts sourced from the US or its trading partners. This legislation, intended to discourage the use of Chinese technology, has prompted significant investment in the US from battery and automobile groups.
Former Trump advisers indicated in November that the ex-president intends to revamp US policy if he secures a second term. With slowing EV sales and companies cutting back on spending, industry executives worry that a lack of incentives could lead to a slump in sales.
General Motors CFO Paul Jacobson attested to the Inflation Reduction Act’s vital role in the EV market. He warned that if the IRA were to disappear, it could significantly impact the profitability of EVs. Nissan CEO Makoto Uchida also stressed the importance of the Act in driving EV sales in the long term.
EVs accounted for 9% of all new vehicle sales in the first three-quarters of 2023, according to BloombergNEF data. The Biden administration has set a goal for electric vehicles to make up 50% of all new sales by 2030.
Despite the global rise in EV sales, growth rates are declining in major markets like the US and Europe. Buyers remain hesitant about the higher prices and perceived inconveniences of electric vehicles, such as charging.
In the US, substantial tax credits for EV buyers and domestic manufacturers have boosted EV offerings. Analysts caution that alterations to these policies could raise investment risks for foreign companies.
Troy Stangarone of the Korea Economic Institute of America noted that Korean companies have significantly invested in the US EV transition, even before the IRA’s introduction. However, he stated that recent investments are tied to expectations that the IRA would accelerate the shift to electric vehicles.
As non-Chinese beneficiaries of the IRA’s restrictions on Chinese sourcing, Korean battery manufacturers LG Energy Solution, SK On, and Samsung SDI have all established North American joint ventures with US carmakers. Hyundai is building a $5.5bn EV and battery plant in Georgia, marking the largest economic development project in the state’s history.
Yet, Tim Bush of UBS highlighted that Korean battery firms have prepared for the potential early withdrawal of tax credits. He mentioned that these credits are the most likely IRA component to be targeted by a future Republican administration.
Stangarone suggested that if the IRA provisions were repealed under a second Trump presidency, Republican politicians would face backlash from voters in the states that have received the most IRA-related investment.
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