Read our updated analysis – 7 November
2024
This
Fuel for Thought edition offers an excerpt from
our new special report, 2024 US election and the automotive
ecosystem: How much change to expect?
One of the most impactful presidential elections in United
States history is scheduled for November 5, 2024. Regardless of the
outcome, the following issues are expected to directly affect the
US auto industry:
- The perception of an existential threat from mainland Chinese
automakers and technology companies; - Positions on environmental policy, particularly as relates to
vehicle emissions and safety regulations; - Trade policy as it relates to both USMCA and potential for
national security tariffs; and - Positions relative to unions and labor.
At S&P Global Mobility, we're looking at every possible
scenario and how various outcomes may change (or not change) the
bigger picture for the auto industry.
It is important to note that policy changes will not be
immediate and could take most of the next presidency to execute.
Even after the election, the trajectory of the new administration
and their focus will not be known until early- to mid-2025.
We expect many companies are likely holding major decisions
until after the makeup of the White House cabinet and advisors
becomes clearer, as well as taking time to understand the impact of
the Congressional and state elections.
As an example, Republicans are vocal about wanting to reduce
funding for the federal programs under the Inflation Reduction Act.
Some states with automotive industrial investment vote Republican
and others vote Democrat. House and Senate representatives from
those states have a stake in maintaining an inviting economic
environment for the district or state they represent as well as
loyalty to party affiliation. The outcome can cause voting along
party lines which may conflict with constituent priorities, and
vice versa.
In
our new special report, we detail several scenarios and how we
see they may unfold from a policy perspective. For anyone with a
stake in the industry, shifting to a scenario mindset becomes
critical for decision-making. A single forecast is only one
guideline. Critical decisions need to consider business and market
demand issues in the context of upper and lower bounds derived from
plausible scenarios, along with a baseline forecast.
Potential policy changes, depending on the scenario,
include:
- 2028+ federal emissions and fuel economy regulations
- Inflation Reduction Act funding future
- Mainland China sourcing tariffs
- California: Does its ability to regulate emissions
continue? - 2026 USMCA Review
Most Likely Outcomes
There are four principal outcomes for the election itself.
S&P Global Mobility does not predict which party will win,
though we do expect the most likely results will be a split
Congress regardless of whether the Republican or Democratic party
wins the White House. Those are the two scenarios we focus on in
our report.
If the Republican party wins the White House
and there is a split House and Senate then we expect there will be
a decision to freeze the emissions legislation covering model years
2028 through 2032. This freeze would effectively hold the
regulations set for 2027 model year steady through at least 2032
model year. We would also expect to see consumer tax credits in the
IRA law cut by half, and the current lease loophole to be
closed.
Our scenario forecast in this case sees US battery electric
vehicle (BEV) market share of new light vehicle sales reaching
about 29% by 2030. We would expect the change in emissions
regulations to result in a reduced focus on higher levels of
electrification (including BEV, plug-in hybrid, range-extender
electric and fuel-cell electric solutions), but an increase in
internal combustion engines with mild levels of electrification and
mild-hybrid solutions.
In this scenario, the impact may include lower vehicle pricing,
less pressure for consumer behavioral change, a greater emphasis on
small and midsize sedans, as well as full-size pick-up and SUV
segments. Overall, we see this scenario with a 6% increase in total
industry volume (TIV) from the base case today.
If the Democratic Party takes the White House
we think it is most likely that the Democrats will also see a split
House and Congress. This scenario could lead to EPA and NHTSA
emissions regulations matched to NHTSA guidelines and for IRA
consumer incentives to be protected. Though the lease loophole is
still likely to be closed, there is potential for additional
incentives for home chargers.
Under this scenario, we expect an increased focus on PHEV and
FHEV, with a reduced focus on BEV, ICE-plus and MHEV. The changes
could also create greater emphasis on sedans (small and mid-size)
as with the Republican scenario, though we expect full-size pickup
and SUV segments flattening. Total industry light vehicle volume
would increase 2% from our base case under this scenario.
Of note, seeing increased emphasis on small and mid-size sedans
in both scenarios also reflects that those segments have
traditionally been more affordable as well as more efficient than
trucks or utility vehicles. Regardless of political party, the US
market is in need of more vehicles at affordable price points, and
the industry, however slowly, will respond.
Conclusion
For the auto industry, uncertainty related to regulations has
been one of the most difficult elements to navigate, and
uncertainty is rampant today. The November 2024 election follows
other recent elections for having potential for massive impact on
the auto industry. The impact and related uncertainties touch
nearly every facet of the industry. Once the makeup of the next US
presidential administration and Congress are settled, the industry
should have a better grasp of what the next four years will look
like, relative to some US policies. Whatever changes or stays the
same in policy and regulation, a consistent framework is what the
industry needs to better navigate and understand how to compete
profitably in the US market.
Download the full special report
Watch the webinar
Listen to the podcast
Ask about our scenarios workshops
