Biden's EV Policy Impact: What Investors Need to Know About the Future of Electric Vehicles in the U.S.
The Biden administration's aggressive environmental strategy has propelled electric vehicle (EV) adoption in the U.S. from a mere 2.5% in 2020 to an impressive 10% in 2024 year-to-date, according to Bernstein's recent analysis. However, the momentum has recently slowed, raising questions about the feasibility of meeting stringent California Air Resources Board (CARB) and Environmental Protection Agency (EPA) targets.
EV Growth Slowdown: A Cause for Concern?
Bernstein's equity research indicates a significant deceleration in EV growth over recent months. This slowdown is troubling for those aiming to meet CARB and EPA objectives. The analysts suggest that while a Democratic administration is likely to maintain current policies, the slowdown emphasizes the need for either more support or more attainable goals.
Democratic vs. Republican Administration: What to Expect
A Democratic White House would likely continue encouraging EV growth through existing policies. However, the analysts warn that without additional support or more realistic targets, established automakers could face increased penalties for non-compliance.
Conversely, a Republican administration appears poised to roll back Biden's EV policies. Both the Republican National Committee (RNC) platform and Project 2025 propose dismantling "harmful regulations" and cancelling existing EV mandates. However, such reversals would require majorities in both the House and Senate and could face significant legal challenges. Any changes to EPA policy, especially concerning 2027 emission targets, could drastically alter the EV landscape.
Key Priorities for Automakers Amid Policy Uncertainty
Bernstein identifies three crucial strategies for original equipment manufacturers (OEMs) to navigate this policy uncertainty:
- Shift Lobbying Focus: Automakers need to advocate for their technological leadership, re-shoring efforts, and cost reductions rather than solely emphasizing environmental benefits.
- Increase Technological Flexibility: Adaptable platforms, like those of Stellantis (NYSE:), allow automakers to pivot between battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), making them better equipped to handle policy changes.
- Make EVs More Affordable: Rapid innovation and scaling are essential to reduce costs and make EVs more accessible to the general public.
Automaker Outlook: Stellantis, General Motors, and Ford
Among major automakers, Bernstein sees Stellantis as the most adaptable to any U.S. election outcome. "Stellantis's flexible platform approach enables it to shift between BEVs and PHEVs and adapt to various growth scenarios," Bernstein noted. The company's global footprint also helps mitigate potential adverse impacts from the U.S. market.
For General Motors (NYSE: GM), Bernstein foresees a favorable outlook under a Democratic administration due to its ambitious BEV strategy. "GM’s Ultium platform and planned BEV launches would benefit significantly from continued policy support," the firm stated.
In contrast, Ford (NYSE: F) might find itself better positioned under a Republican administration, given its need to adjust its BEV strategy and pivot towards more PHEVs while still meeting EPA and CARB targets.
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Breaking It Down: How This Affects You
What's Going On?
- EV Adoption: The Biden administration has pushed for more electric vehicles (EVs), increasing their presence from 2.5% in 2020 to 10% in 2024.
- Slowdown: EV growth has recently slowed, raising concerns about meeting environmental targets.
- Political Impact: The future of EV policies depends heavily on the outcome of upcoming elections. Democrats are likely to continue supporting EVs, while Republicans may roll back existing mandates.
Why Should You Care?
- Investors: Understanding these dynamics helps you make informed decisions about investing in automakers.
- Consumers: Affordability and availability of EVs could change based on policy shifts.
- Automakers: Companies need to adapt their strategies to navigate these uncertain times, focusing on flexibility and cost reduction.
Bottom Line
The future of electric vehicles in the U.S. hinges on political outcomes and policy adjustments. As an investor, staying informed about these changes can help you anticipate market trends and make smarter financial decisions.