[Bojo, Battery] Growing US Presidential Election Risks... Uncertain Electric Vehicle and Battery Industry

Successive Changes in Electric Vehicle and Battery Factory Construction Plans

Following the electric vehicle (EV) chasm (temporary stagnation in a growth industry), the risk surrounding the U.S. presidential election is increasing, causing changes in investment and factory construction plans for EV and battery companies.

On the 23rd (local time), Elon Musk, CEO of Tesla, stated during the Q2 earnings conference call, "Former President Trump said he would impose heavy tariffs on vehicles produced in Mexico," adding, "If that happens, it doesn't make sense to invest heavily in Mexico. We need to see how the situation unfolds." Tesla had previously announced plans to invest $5 billion (approximately 6.9195 trillion KRW) to build its sixth Gigafactory in Nuevo Le?n, Mexico. Although all necessary permits have been completed, the construction plans have been continuously delayed.

The U.S. presidential election scheduled for November this year is expected to be a crucial turning point for eco-friendly policies. The currently leading former President Donald Trump is advocating for the repeal of the Inflation Reduction Act (IRA) pushed by President Joe Biden and is signaling changes to EV policies. On the other hand, Vice President Kamala Harris, a leading Democratic presidential candidate, is expected to continue Biden’s policy direction. This U.S. election is being called the decisive battle of the "war of money," involving astronomical investments and subsidies. Accordingly, attention is focused on the fate of companies building large-scale EV and battery factories in North America.

Recently, the construction of the LG Energy Solution and GM joint venture’s third plant has also been put on hold. Although construction has not stopped, the pace has slowed, and the construction schedule is highly likely to be changed in the future. This plant is an EV battery production base with an investment of $2.6 billion (approximately 3.6 trillion KRW). It was originally scheduled to be completed in the second half of this year and to start phase one mass production early next year.

Other North American EV companies such as Ford and Rivian have also recently halted construction or postponed production schedules for their EV factories. While the EV chasm has had an impact, analyses suggest that the increased risk ahead of the U.S. presidential election has influenced these decisions. In particular, recent assassination attempts on former President Trump and the withdrawal of President Biden’s candidate have increased uncertainty surrounding the U.S. election. The EV and battery industries are being shaken by the eco-friendly policies that could change drastically depending on whether there is a regime change.

Recently, major foreign media outlets have analyzed that Asian EV battery companies, including those from Korea, are already facing difficulties due to the Trump risk and will continue to struggle amid growing uncertainties. One foreign media article titled "Trump Risk Will Push Asian Battery Manufacturers to the Brink" stated, "If former U.S. President Donald Trump wins the November election, significant changes will be necessary for Asian battery companies’ U.S. strategies," adding, "Battery companies are struggling with fierce price competition from Chinese companies such as CATL. Due to the resulting margin reductions, battery companies have limited ability to endure periods when U.S. policies are unfriendly."