US President-Elect, Joe Biden, the world’s (future) most powerful person is a renowned ‘car guy’. What does that mean for the auto industry?
Cars are in the blood of Joe Biden, soon to be the 46th President of the United States of America. The son of a car salesman and owner of a 1967 Corvette, Biden grew up around dealerships and US-made cars. Indeed, across three decades, Biden’s father managed dealerships across the then, big three US brands; General Motors, Ford and Chrysler.
So far, the reception to Biden’s election win has been met positively by major OEMs around the world, with Volkswagen, Ford and General Motors publically voicing their support.
Speaking to Bloomberg, Herbert Diess, and Global CEO of Volkswagen stated that “a Democratic program probably would be more aligned with our worldwide strategy.”
While in the US, a GM company statement read: “We look forward to working with the new administration and incoming Congress on policies that support our customers, dealers, and employees, help strengthen our manufacturing presence in the United States, and advance our vision of an all-electric, zero-emissions future.”
Among a raft of auto-focused policy announcements, major auto industry initiatives of a Biden presidency include:
1. Electric Vehicle infrastructure investment
Biden has been a long-time advocate of electric vehicles, pushing a $2B grant for battery development way back in 2009 when he was Barak Obama’s Vice President.
A key 2020 election pledge, Biden has outlined US$400b in public investment to transition to clean energy and support states and local officials to build 500,000 new electric vehicle (EV) charging outlets by the end of 2030. Both measures are set to improve ownership outcomes for electric vehicle owners and adopters, with less than 88,000 chargers currently available across mainland USA.
Biden also plans to replace the federal government’s fleet of internal combustion engine (ICE) vehicles with US-made EVs. This will boost sales and eventually increase the flow of EVs into the used car market, which could improve affordability for US consumers.
2. Cash for clunkers scheme
Biden also intends to introduce a cash for clunkers scheme. This will encourage American consumers to trade old and polluting petrol and diesel cars for newer, cleaner vehicles including EVs. Such a scheme could be a boon for US dealers and brands by stimulating more sales enquiries and economic activity.
The US federal government currently subsidies EVs with a US$7500 consumer tax credit for the first 200,000 EVs any OEM sells. Biden plans to remove this cap for EVs made in the USA.
Tesla and GM have already reached this cap, preventing consumers from obtaining the credit when purchasing a US-made Tesla Model 3, for example.
The tax credit changes are also good news for Volkswagen and upstarts such as Rivian and Nikola. It could, however, impact demand for Ford EVs, which has so far committed to manufacturing new EV models, such as the Ford Mustang Mach E, in Mexico and Canada.
3. Stricter fuel economy and emissions laws
Biden plans on working with states on tighter and more consistent emissions guidelines, which again points towards the adoption of EVs. Emissions and fuel economy standards differ greatly across the USA, with some states following the lead of the country’s largest state and auto market, California, which will require all new passenger cars and trucks sold to be zero emissions by 2035.
The Biden effect on Australia’s auto industry
It’s too early to say what the effect, if any, that a Biden administration might have on the Australian auto industry. It’s unclear whether trade terms between the USA and Australia may change.
According to Federal Chamber of Automotive Industry’s monthly VFACTS report, just 2385 of the 81,220 cars sold in October 2020 were sourced from the US – paling in comparison to the number of car arrivals from Japan, Thailand, Korea and Germany. Year to date, sales of US-sourced vehicles are down 16%. Prominent models made in the US and sold in Australia include the Ford Mustang, BMW X5 and Mercedes-Benz GLE-Class, as well as the growing number of full-size pick-ups that are appearing on local roads.
Since Biden’s win, however, the $A dollar has rallied. Long term appreciation of the local currency could result in cheaper new cars for Australian consumers. But don’t hold your breath – most of the movement is likely to go to importers’ revenue lines.
Backed by new initiatives and regulations, global OEMs may ramp up investment in EVs to satisfy a growing demand for EVs in a US market. The introduction of new models in the US could mean that Australian consumers are also presented with a wider range of EV models to purchase.
As long, of course, as those brands see value in producing cars for right-hand drive markets. GM is in no hurry and so far, Ford has killed any hopes of its Mustang-badged EV flagship coming down under, for example…
While the full story on the effect of a Biden administration on the US and global auto industry will be penned late in the second half of this decade, the presence of a ‘car guy’ in the White House’s top job bodes well… for American car buyers, for American car brands and car dealers – and potentially for Australian auto industry connections too.
Further reading
VFACTS October: Sales down just 1.5 per cent
Australian new car inventory to improve
Federal budget delivers mixed news for car dealers
Tesla approaching 10,000 sales in Australia
