Wards Intelligence: Higher EV Tariffs Could Fuel Inflation, Interest Rates

Battery Technology interviewed industry analyst Adam Ragozzino from Wards Intelligence before his presentation, “Winning the EV Race: An Industry Update,” at The Battery Show North America. In this interview, he shares insights on critical factors influencing the EV market, including vehicle sales trends, production forecasts, and supply chain dynamics. As the upcoming US presidential elections could impact policies affecting EV growth, Ragozzino’s analysis aims to clarify the complexities surrounding the EV landscape and identify pathways for future progress in this rapidly evolving industry.

Outlook for the US “Battery Belt”

EV market optimism comes with some caveats. Ragozzino explained that many rural US communities are poised to reap the benefits of new jobs and billions of dollars of foreign development of EV and battery capacity, thanks to the Inflation Reduction Act (IRA) and Infrastructure Investment Jobs Act.
“A domestic supply chain insulated from the interruptions experienced during Covid-19, not to mention batteries that can wear the badge of “made in America,” is a concept that sells well in the age of great power competition between the US and China.”

But, he cautioned, “it doesn’t matter how many battery factories you build” without:

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World sales share PEVs by OEM origin. Courtesy of Wards Intelligence.

Supply chain issues

US tariffs to restrict the flow of Chinese batteries and metals immediately created bottlenecks in EV material supply chains and manufacturing capacity, he continued.

“The IRA and tariffs cut the US off from the best and lowest cost source for batteries and their inputs. Even if the domestic supply of critical materials was enough – which it is not – a majority of the mineral processing is done in China, and it will take years, if not decades, before domestic supply chains have sufficient capacity to meet demand.”

A better solution? Implementing tariffs on Chinese imports while encouraging partnerships with US-based companies for Chinese auto and battery makers interested in selling in the US. “Ford’s tie up with CATL to provide battery know-how in a Ford-owned factory should be a model, not a point of political contention,” he asserted.

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Hybrids and plug-in hybrids alleviate some battery demand because they use smaller batteries and are less dependent on charging infrastructure. “If everyone started driving one today, it would immediately reduce gas consumption and CO₂ emissions by as much as 30%.”

Global production volume of all power types by OEM origin. Courtesy of Wards Intelligence.

Presidential election effects

With Nov. 5 fast approaching, Ragozzino and other pundits have visions of how the outcome might affect battery and EV manufacture. A Kamala Harris presidency “will likely mean a continuation of Biden policies, or at least EV-friendly policies. Yet, Harris is not Biden, so there is a possibility a President Harris could craft more mutually beneficial legislation when it comes to China.”

A Donald Trump presidency, however, “brings much more uncertainty,” particularly as to whether he would undo some IRA initiatives. “While it’s unlikely President Trump could undo all the IRA initiatives, the undoing of some would hurt the numerous red states that have benefited from the (EV and battery) factories. But Trump can undo the incentives. In the long run, this would be just as detrimental to the EV industry given the incentives China and Norway use to build EV adoption.”

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And, if Trump wins and imposes higher tariffs on Chinese goods, even tariffs on all goods coming into the US, those could fuel inflation and interest rates – “and that would be bad for selling cars, electric or otherwise.” Yet “Trump has also said he would allow Chinese companies to build factories in the US,” Ragozzino added. That, combined with mandatory partnerships with US-based companies “similar to what auto companies had to do to enter the Chinese market back in the ’80s,” would spur technology, design, and manufacturing expertise transfers.

The China question

Ragozzino delves deeper into looming questions about the potential threat of Chinese exports to the global EV market—specifically the US.

“In the US, thanks to tariffs, very few Chinese-made cars are sold here. So far, only the Geely-owned Volvo and Polestar brands are sold in the US. But that doesn’t mean Chinese automakers aren’t a threat to Detroit.” He said.

“Looking at all the other markets shows some worrying trends. Chinese OEMs in Europe, while still at a low volume compared to the domestics, are gaining share – especially with EVs – and this is at the expense of legacy American and European brands.” According to him, those brands have lost their cachet in China.

“Chinese OEMs are also taking market share in South America and other parts of Asia. And it’s not just EVs: Chinese-made ICE vehicles are gaining share in China and other parts of Europe, too.” Losing market share in China and Europe while Chinese OEMs fill in the gaps in South America and Asia “is restricting American and European automakers to only their home territories, so companies that have been getting by despite high debts/costs (Ford) or bloated corporate structures (VW) are feeling the weight of their excess. The threat to the legacy automakers is quite real – and it’s well past being a threat.”

For more insights like these, register now for The Battery Show North America 2024 running Oct. 7-10 at Huntington Place in Detroit.