By By David Shepardson, Norihiko Shirouzu and Ben Klayman
WASHINGTON (Reuters) – Automakers are bracing for President-elect Donald Trump to impose new tariffs on vehicles from Mexico and potentially from other countries and to reverse many existing pro-electric vehicle policies, industry associations and executives said.
Trump has said he plans to begin rescinding Environmental Protection Agency and Transportation Department vehicle rules on his first day in office and is considering paring back or eliminating EV tax breaks and other incentives.
Those regulatory changes could give automakers more flexibility to build more profitable gas-powered SUVs and trucks but raise questions about the future of billions of dollars in EV battery and manufacturing spending.
The Zero Emission Transportation Association, which includes Tesla (NASDAQ:TSLA), Rivian (NASDAQ:RIVN), Lucid (NASDAQ:LCID) and battery maker LG, said on Wednesday it was ready to work with Trump. The “next four years are critical to ensuring that these technologies are developed and deployed by American workers in American factories for generations,” it added.
Tesla shares closed nearly 15% higher on Wednesday as investors bet it stood to benefit from its CEO Elon Musk’s close ties with Trump.
The American Trucking Associations on Wednesday called on Trump to replace the EPA’s tighter tailpipe emissions with national emission standards that were “technologically achievable and account for the operational realities of our essential industry.”
Trump plans to rescind California’s ability to set its own vehicle emissions rules, as he did in 2019. President Joe Biden reinstated California’s authority. Trump will also decide how to spend billions of dollars in EV charging grants.
Trump has repeatedly warned he will impose tariffs of 200% or more on vehicles imported from Mexico and could also impose them on Asian and European vehicles.
Trump wants to prevent Chinese auto imports, but is open to Chinese automakers building vehicles in the United States.
“We’re going to give incentives, and if China and other countries want to come here and sell the cars, they’re going to build plants here, and they’re going to hire our workers,” Trump told Reuters in August.
Mark Williams, president of site selection firm Strategic Development Group, expects to see greater demand for his company, but said tariffs will likely result in higher costs.
“If you’re going to cut China out of our manufacturing system of pieces and parts that feed into automakers and you don’t have a Mexico or somewhere else, I just don’t know how much of it you can do in the U.S.,” he said. “I think we need Mexico more than ever if China is getting cut off.”
South Korea’s trade minister said Wednesday he expected companies from his country to invest more in the United States if Trump imposes higher tariffs.
Honda (NYSE:HMC)’s production capacity in Mexico is about 200,000 vehicles annually and 80% are exported to the U.S. market, chief operating officer Shinji Aoyama said.
If the U.S. were to impose permanent tariffs on vehicles imported from Mexico, Aoyama said Honda would have to think about shifting production.
Toyota (NYSE:TM) builds Tacoma trucks at two plants in Mexico and sold more than 230,000 of the model in the United States last year.
A person close to Toyota said steep tariffs by Trump on Mexican imports could prompt the automaker to move production of a vehicle like the Tacoma to San Antonio, Texas. A Toyota spokesperson declined to comment.