What Trump's re-election could mean for the automotive industry

In an election campaign which featured an assassination attempt, a last minute candidate switch and two extraordinary debates, you could be forgiven for missing out on Donald Trump’s plans for the automotive industry. 

According to reports, the future president doesn’t drive much any more. But as a former Rolls-Royce, Ferrari and Lamborghini owner, he’s taken a keen interest in cars in the past. He’s also become best buddies with Elon Musk - owner of Tesla - and he put time aside to visit car manufacturers in Michigan, during the campaign. 

While it’s unlikely to be as big a priority as immigration or the border, we can expect all things automotive to be pretty high on the ‘Make America Great Again’ agenda. Here’s what the industry might face in a second Trump term.

Tariffs, trade wars, and bringing jobs ‘back home’

One of Trump's signature policies in his first term was his aggressive stance on trade, and it looks like he's planning a similar approach this time around.

Reports suggest he might impose tariffs as high as 200% on cars imported from Mexico, in an attempt to incentivise American OEMs to keep production within their borders. And it’s not just Mexico who might face tariffs, Asia and Europe may also be in his sights. For Trump, it’s all about “bringing jobs back home” and reducing dependence on foreign manufacturing.

For American OEMs, this could be both a blessing and a curse. On the one hand, increased domestic production could lead to new jobs and investment in American plants. On the other, automakers could face higher production costs, which might translate into higher prices for consumers. There’s also the question of how these tariffs could impact relationships with global trading partners, especially as EV manufacturing often requires materials from a global supply chain.

For OEMs outside the US wanting a slice of the market, the option appears to be clear - move production there or face hefty tariffs. Speaking at a campaign rally in Savannah, Georgia, Trump said: “I want German car companies to become American car companies. I want them to build their plants here.”

It doesn’t get much clearer than that.

New tax breaks for American car buyers

Some good news for pretty much everyone in the industry comes in the form of a potential tax cut. 

During their re-election bid, Trump’s campaign floated the idea of making car loan interest payments fully tax-deductible. This could reduce the overall tax bill for American car buyers, easing their financial burden. Many see this as a potential boost for the industry, encouraging more car sales and, by extension, more production.

A removal of EV tax incentives

However, just as we see one automotive tax break arrive, we may see another one removed.

Trump has been openly skeptical of EVs, and he’s hinted at scaling back the $7,500 federal tax credit for electric vehicle buyers - introduced by Biden. Critics argue this could slow down EV adoption in the US, spelling challenges for the OEMs who've been investing millions into their EV lineups.

However, a wildcard on the EV front could be the influence of Elon Musk. Musk's influence could yet steer Trump’s policies in some unexpected directions, particularly if he takes a place in the cabinet.

Rolling back of environmental regulations

It’s fair to say that Trump isn’t a big fan of environmental regulations. During his first term, he rolled back several Obama-era fuel efficiency standards, and he’s hinted at doing the same this time around. For the automotive industry, that could mean a relaxation on emissions standards, giving manufacturers more freedom in what they produce and how they build it.

While many OEMs are already moving toward a greener future, this deregulation might open doors for them to offer a wider range of vehicle types, including more powerful trucks and SUVs that might not meet strict emission targets elsewhere. But environmental groups aren’t thrilled with the idea, and it's likely to become a major talking point as automakers balance consumer demand with global trends in sustainability.

Whether all of this will put American car companies back in the driver’s seat remains to be seen. Either way, you best buckle up for the ride.