Trump Returns to the White House: Uncertainties and New Possibilities for the Automotive Industry

The highly anticipated US presidential election is coming to an end. According to statistics, Trump has obtained 277 electoral votes, exceeding the critical line of 270, and has basically locked in the position of the new US president.

After every presidential election, the automotive industry, which has a close relationship with climate policies and local industries, will become the core of the new president's new policies.

The US government led by the Democratic Party has always taken a tough stance towards the Chinese automotive industry. Biden not only raised the tariff on Chinese electric vehicles from 25% to 100%, but also took a number of measures to restrict the use of Chinese connected vehicles in the US. The blockade of the semiconductor industry has also had a chain reaction in the Chinese intelligent automotive industry.

While Trump of the Republican Party is the core promoter of the "Revitalize American Manufacturing" strategy. As early as 2017, "Manufacturing Return" became one of his most important economic policies in the presidential campaign.

And the Chinese and even the global automotive industry will face new challenges and opportunities after Trump returns to the White House.

Build a High Tariff Wall in Mexico to Block the Access of the Automotive Industry to the US

The protection wall of the US for the local automotive industry has even extended to Mexico.

Trump stated that the US will impose a 25% tariff on all Mexican goods. If the Mexican government fails to effectively solve the illegal immigration problem, he will raise the tariff to 50%, 75%, or even 100% until the problem is solved.

And Mexico is the key location for the Chinese automotive industry chain to enter North America.

For Chinese automakers to sell automotive products directly to the US, they will have to bear a tariff of up to 100%. Entering the US through Mexico has become the mainstream solution for Chinese automakers.

BYD, a leading Chinese electric vehicle company, has previously considered establishing an electric vehicle factory in Jalisco, Mexico, and is currently determining the location. It is expected to produce 150,000 vehicles annually.

Chery, a major Chinese automaker for overseas markets, has also set its sights on Mexico and plans to build an automotive factory with an annual production capacity of 400,000 vehicles in Mexico, with the supply and marketing scope covering the entire North American market including Mexico.

According to the data released by the Mexican government, in 2023, China exported 415,000 vehicles to Mexico, but the total sales of Chinese automakers in Mexico were only 132,000 vehicles. The difference of 283,000 vehicles was exported to other North American countries through Mexico.

The new US tariff policy on Mexico will directly increase the difficulty for Chinese automobiles to be sold in North America. Once sales stagnate or decline, the construction plans of Chinese automakers in Mexico will also be affected.

Facing Chinese automakers building factories in Mexico, Trump even directly stated that he will impose a "200%" tariff on Chinese electric vehicles produced in Mexican factories, even though these factories have not yet been completed.

Even if this tariff policy is not fully implemented, just Trump's high-pressure stance in Mexico has caused many local manufacturing industries to retreat.

An industry insider told 36Kr that just last year, many Chinese companies' plans in Mexico were to build factories within 6 months. But now, including Tesla, the factory construction plans in Mexico have been put on hold. "The local government is not proactive, and many business processes cannot be pushed forward."

Of course, some businesspeople who have been layout in North America for many years told 36Kr that if Trump's strategy is the return of American manufacturing, then building factories locally and solving local employment problems are also in line with industrial policies.

"We don't need to be too panicked," the person said.

Musk Supports Trump's Election, Tesla Breaks the Development Deadlock

After Trump took office, the automotive company with a greater increase in stock price is the electric vehicle manufacturer Tesla.

On November 6 local time, Tesla's stock price soared 13%, with a total market value of $913.2 billion, an increase of more than $100 billion compared to the previous day, reaching a new high in the second half of the year. Musk's support for Trump has been fully reflected in the stock price.

Since July, Musk has invested at least $118 million to support the Trump team. In Trump's victory speech, he mentioned Musk 11 times.

Although Trump hopes to promote the return of shale energy, considering his overall manufacturing return strategy, Musk's electric vehicles and the 4680 self-developed battery will become policy priorities. Moreover, in the AI field where Musk is heavily betting, Tesla will also encounter a new round of growth opportunities.

In October this year, Tesla released an unmanned vehicle Cybercab without a steering wheel, accelerator, or brake pedals, and stated that it will be the first to promote this Robotaxi model in California and Texas.

However, the vehicle without a steering wheel, accelerator, or brake pedals is too innovative, and the local laws and regulations are still in a blank state. Whether Tesla Cybercab can carry out formal commercial operations is unknown.

Fortunately, the Republican candidate Trump supported by Musk was successfully elected and won the support of Texas, which brings good news for the landing of Cybercab in Texas.

And Texas has also become Musk's business base. Tesla's largest Austin factory is located in Texas. In July this year, Musk even moved the headquarters of his two companies, SpaceX and X.ai, to Texas. In addition to the landing of Cybercab, SpaceX and X.ai, which were previously tightly controlled by the government, will also receive more support from the US government in the future.

In the important market of China on the other side of the world, Tesla will also encounter new changes. In the past four years of Biden's term, Tesla's relationship with the Chinese industrial chain has been in a hesitant state. 36Kr previously reported that in the past two years, Tesla has begun to take back many design and development rights.

In addition, the entry of Tesla's technological flagship, the Autopilot software FSD, into China has also not been smooth. During this period, affected by the impact of new energy vehicles in China, Tesla's market share in China has continuously declined, from 16% in 2021 to 6.4% in September 2024.

After Trump takes office, these tense situations faced by Tesla will encounter the possibility of change. 36Kr exclusively learned that recently, more than 20 engineering executives from Tesla's headquarters visited China to visit supply chain companies such as AC power and vehicle parts.

If after the election, Musk can use his political capital of betting on both China and the US to accelerate the landing of FSD in China and further clarify the strategy of the industrial chain layout in China, then, in the face of the siege of Chinese automakers, Tesla will have more chances of winning.

European and Japanese Automakers Will Rebalance the Chinese and North American Markets

After the election, it is the automotive companies from Europe and Japan that are more nervous.

Currently, the vehicles produced by Mercedes-Benz and BMW in Europe and sold to the US account for about 8% of their total sales, and for the Volkswagen Group, it is 3%. However, for Porsche, the "profit cow" of the Volkswagen Group, all the vehicles sold in the US come from European factories.

Morgan Stanley released a research report last week, stating that the election of a Republican president may increase the tariff risk of EU vehicle exports, and German automakers will be the most affected.

Trump stated in his campaign speech that he will attract overseas automakers to set up factories in the US through tax incentives. "I want German car companies to become American car companies. I want them to build factories here."

Morgan Stanley's research report analysis said that it is difficult for European manufacturers to avoid tariffs by building factories in the US. Even if the tax rate is reduced from 21% to 15%, promoting the local production of high-end sedans in the US is not easy and will not quickly increase their price competitiveness in the US market.

The changes in US-EU tariffs and Trump's negative attitude towards electric vehicle policies will increase the survival difficulty of European automakers in the US. European automakers represented by Mercedes-Benz, BMW, and Porsche may shift the responsibility of electric transformation to the Chinese market.

The impact on Japanese automakers is even greater.

In the context of the rapid rise of the Chinese automotive industry, Japanese automotive companies can still maintain high sales and profits. An important reason is the significant depreciation of the yen and the huge sales of Japanese automobiles in the US market. In 2023, the overall market share of Japanese automakers in the US was as high as 35.5%, second only to 43.5% of local US automakers.

Trump once publicly stated that the continuous depreciation of the yen is "a disaster for the US", and the price competitiveness of US export products will decline.

If the yen is forced to appreciate during Trump's term, it will seriously affect the competitiveness and profits of Japanese automobiles sold in the US. Japanese automakers need to rethink their future strategies in the Chinese and US markets to ensure the development of the Japanese automotive industry.

And the above results require Japanese and German automakers to tilt more resources towards the Chinese market.

The substitution actions of Chinese independent brands in the economic vehicle model field have made significant progress. In the past year, the sales of BYD's Seagull model have surpassed that of the Sylphy model of the joint-venture automaker Dongfeng Nissan. In the SUV model, BYD Yuan Plus, Song Plus and other models have even completed a comprehensive overtaking.

In the high-end automotive field, although the sales of models such as Li Auto L9 and AITO M9 above 400,000 yuan have been increasing.

In the fierce competitive landscape, Japanese and German automakers will have to provide more support to ensure that they "do not leave the table" in the Chinese market and gain buffer time for transformation.

It can also be predicted that the Chinese automotive market is about to encounter a more intense competition.