Economy & Tech
To EV or Not EV? Why the Auto Industry Should Keep Its Options Open
Trump has argued against an EV-only future, citing its disadvantages and risks to industry. Akio Toyoda supports a multi-pathway approach to carbon neutrality.
With the United States presidential election approaching on November 5, Vice President Kamala Harris of the Democratic Party and former President Donald Trump of the Republican Party are engaged in a fierce battle in key swing states such as Michigan, Pennsylvania, Wisconsin, and North Carolina. In the Rust Belt, an area known for its many automakers and parts manufacturers, the electric vehicle (EV) policy has become a central issue.
When President Joe Biden took office in 2021, he framed green initiatives as a matter of social justice. He famously drove a Ford EV, declaring, "The future of the auto industry is electric," and shifted US policy toward decarbonization.
Vice President Harris has followed suit, promising $7.6 billion USD to build charging infrastructure, alongside tax credits up to $7,500 and subsidies of $4,000 for EV purchases.
Back in 2021, the media widely predicted that all future cars would be electric. Japan's then-Prime Minister Yoshihide Suga echoed this sentiment, announcing Japan's commitment to carbon neutrality.
EV Trends
EV sales had been on a general slowdown until recently. In the US, EVs account for less than 8% of the approximately 16 million new cars sold, with Tesla making up nearly 60% of those sales.
During the first half of 2024, Tesla's North American sales dropped to 290,000 units, a 13% decline compared to 2023. However, its net income for the third quarter rose 17.3% year-on-year.
In Europe, EV sales in August 2024 were down 43.9% year-on-year, according to the European Automobile Manufacturers Association (ACEA).
The exception to this general trend is China, where its EV market share continues to grow. In response to weakening demand elsewhere, companies like Ford and GM have suspended or pulled back from planned battery factory projects. They are shifting their focus back to hybrids and traditional combustion engine vehicles.
Several EV startups have emerged in the US, but most have struggled, with many facing bankruptcy or delisting. Even Apple, after investing billions of dollars in EV development, has abandoned its project.
Meanwhile, Japanese automakers are steadily increasing their market share, currently accounting for 38% of the North American market. This is largely due to sales of traditional gasoline-powered vehicles.
Trump's Fiery Rhetoric
The pro-EV camp is facing even grimmer news. Donald Trump, in fierce competition with Kamala Harris for the presidency, has strongly criticized the current administration's EV policies.
He even promised a major policy shift, stating at the Republican National Convention in Milwaukee, "I will end the electric vehicle mandate on day one."
Trump's criticisms of EVs have continued unabated. Among other things, he has claimed that EVs "don't go far enough" and are "very, very expensive." He has also argued that the EV policy only benefits the wealthy.
Trump has pointed out the inconveniences caused by a lack of charging stations, saying in an interview: "The happiest moment for somebody in an electric car is the first 10 minutes [...] The unhappiest part is the next hour because you're petrified that you're not going to be finding another charger."
Additionally, he raised concerns about the need for a stable power grid, which isn't always available. At an October political rally in Michigan, he remarked, "They want to go to an all-electric car, right? But in California, where they're going all-electric, they have blackouts."
Elon Musk's Endorsement
Some speculate that Trump might soften his stance on EVs, given that Tesla CEO Elon Musk has donated $75 million USD to support him.
In an interview with CNBC, Trump said, "He's [Elon Musk] one of our great geniuses [...] we have to protect Thomas Edison and we have to protect all of these people."
At the same time, I heard Trump has claimed that he is advising Tesla to produce gasoline-powered vehicles and hybrids.
On October 3, Trump intensified his rhetoric at a rally in Michigan, a major hub for the auto industry. He argued that going all-electric would destroy the auto business in Michigan and wipe out suppliers.
Trump further suggested that the shift to EVs would result in all cars being produced in China and that Chinese factories in Mexico would eliminate American jobs. "You will not be making any more cars in Michigan. It's all going to be moved over to China in different places, all electric," he said.
Electric vehicles rely heavily on batteries, which account for 40% of the total cost of the car. Currently, China controls 30% of the raw materials and 80% of the refining process necessary for battery production, positioning it to potentially dominate the global EV market.
Protecting Key Industries
Regardless of the election outcome, the US will move from free trade towards a protectionist stance aimed at shielding key domestic industries and jobs. Trump has consistently criticized NAFTA (the North American Free Trade Agreement), arguing that it cost millions of American jobs. In a similar vein, the Biden administration imposed a 100% tariff on Chinese-made EVs in September.
Under his MAGA (Make America Great Again) vision, Trump's goal is to revive US manufacturing. By minimizing taxes, energy costs, and regulations, Trump aims to attract global car companies and turn the US into an industrial powerhouse.
Toward this, "My goal will be to cut your energy costs in half within 12 months after taking office," Trump said at a steel plant in Potterville, Michigan in August.
US oil companies and parts manufacturers for internal combustion engines remain strong supporters of his platform.
Multi-Pathway Strategy
Trump's approach centers on ending the preferential treatment given to EVs under Biden's policy. This aligns with the "multi-pathway" strategy Toyota's Akio Toyoda advocated in 2021 at a press conference for the Japan Automobile Manufacturers Association. At that time, Toyoda emphasized the need for a broader range of options.
Back then, Japan's Suga administration had announced plans to ban the sale of new gasoline-powered cars by the mid-2030s. In response, Toyoda argued, "What Japan needs to do now is to expand its options for technology. I think regulations and legislations should follow after."
He added that banning gasoline or diesel cars outright from the start would limit options and could weaken Japan's competitive edge.
The US presidential election has reignited debates over industrial policy. Instead of politicians telling consumers what to buy, that choice should be left to the market. By protecting key industries and jobs through diverse technologies, the nation can build a more prosperous future — surely, this is a reasonable argument.
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(Read the article in Japanese.)
Author: Koko Kato
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