Electric car stocks were split Wednesday as fresh election results showed President Trump trailing Joe Biden in key swing states, while the outlook in the Senate tilted toward Republicans.
XUpdated vote tallies in Wisconsin and Michigan put Biden ahead of Trump.
A Biden presidency is likely to speed up the adoption of electric trucks and SUVs, while Trump's reelection would return to the White House an opponent of key incentives for electric-car stocks. However, Senate control is still unclear, with Republicans still having a good chance of holding the upper chamber.
U.S. auto stocks Tesla (TSLA), General Motors (GM), Ford (F) and Nikola (NKLA) reversed lower by the close of trading. But Chinese electric car stocks rallied on more signs of a sales rebound in the world's biggest electric car market.
That came as Warren Buffett-backed BYD (BYDDF) joined Chinese peers Nio (NIO), Xpeng Motors (XPEV) and Li Auto (LI) in reporting robust electric car sales last month.
To encourage EV adoption, the Biden campaign set four key targets: building 500,000 public EV charging stations by 2030, restoring the full EV tax credit, shifting government fleets to electric cars, and developing a new fuel economy target.
Additionally, Biden would raise or get rid of the manufacturer cap on the EV tax credit, which is set at the first 200,000 vehicles sold. Tesla and GM have already maxed out on existing caps.
But, assuming Biden is elected president, getting these measures through a GOP Senate or a razor-thin Democratic majority would be difficult.
At the close of Wednesday stock market trading, Tesla stock fell 0.7%, reversing back below the 50-day line. It's still near a 466 handle buy point. That compared to losses of 0.3% and 3% for GM and Ford, respectively, with Nikola down 2%. Meanwhile, Nio stock climbed 6.2%, Xpeng Motors shot up 23% and Li Auto rallied 5.2%, while BYD stock climbed 2.7%.
Trump's Actual Record On Electric-Car Stocks
In contrast to Biden, President Trump has a mixed-to-poor record on promoting electric vehicles. During the first presidential debate of the 2020 election, Trump claimed, "I'm all for electric cars." He went on to take credit for "big incentives to electric cars."
But the facts tell a somewhat different story. In fact, the IRS tax credit for plug-in vehicles and all-electric cars was implemented by the Obama-Biden administration, under the clean air act of 2009.
Even more telling, the Trump administration tried to nix the $7,500 federal tax credit for new electric vehicle (EV) purchases. It said the move would save the U.S. government $2.5 billion over a decade. In addition, the president seeks to roll back Obama-era vehicle emission standards, a move that could significantly slow EV adoption.
In 2019, Trump and California went to war over clean cars. The president challenged the state's authority to require automakers to build cleaner vehicles than federal rules require. He also opposed EV mandates adopted by several states, including California.
Then, in August that year, he attacked automakers for not backing fuel efficiency rollbacks, singling out Ford and GM. Wary of political minefields, GM and Ford sidestepped the controversy. But auto and EV industry experts widely expect a bigger EV push from a Biden presidency.
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Biden Boost To Electric-Car Stocks
A Biden White House and a blue wave across Congress would mean "a quick return to the fuel economy and emissions standards set by the Obama administration," according to Cox Automotive.
It also would herald "an immediate end of the clash with California," Cox chief economist Jonathan Smoke wrote Oct. 27.
Even without full control of Congress, a Biden administration could reassert fuel economy and emissions standards and allow states like California to go further.
California-based Tesla, the current darling of Wall Street, would seem to benefit most from such policy change. But so could the clutch of electric-car stocks that emerged in the wake of Tesla's surge this year, including Nikola, Workhorse Group (WKHS) and Lordstown Motors (RIDE).
However, though fuel economy and emissions standards would likely spur traditional automakers to push into electric cars much faster in the U.S., as they have in Europe.
Then there are the battery makers and parts suppliers to the EV makers, who also have a lot to gain. Such companies include LG Chem, Panasonic, Aptiv (APTV), Albermarle (ALB), Piedmont Lithium (PLL), Livent (LTHM) and SQM (SQM). Aptiv and Albermarle were not active early Wednesday, Piedmont Lithium stock rose 2.8%, and SQM shed 1.6%.
All told, Biden's proposed $2 trillion climate plan seeks to eliminate carbon emissions from the power sector by 2035. As a result, Smoke added, "a blue wave in November could produce a 2021 infrastructure package with a green hue that would benefit EV adoption."
And analysts at Wood Mackenzie said Sept. 8 that raising the manufacturer cap would "immediately help" Tesla and GM. Meanwhile, "all other automakers would likely welcome the opportunity to achieve the economies of volume before feeling the pressure to reduce the sale price of their electric vehicles."
But the odds of a blue wave in Congress appeared to diminish as results came in early Wednesday. Tech stocks surged as antitrust fears eased.
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Trump Signals EV Infrastructure Support
In a potential second term, Trump is seen likely to stick with looser emission and fuel efficiency standards. Trump also has championed the oil and gas industries, while Biden has flip-flopped on fracking.
On the other hand, Trump supports a nationwide EV charging network, a proposal that has broad bipartisan support. Legislators are working to authorize $1 billion in federal grants to create EV charging stations under the ambitious America's Transportation Infrastructure Act. Trump welcomed those efforts in a July 2019 tweet: "Do I hear the beautiful word, BIPARTISAN? Get it done. I am with you!"
To coax consumers to accept electric cars, high-speed public charging networks are seen as a necessity. Range anxiety weighs heavily on the mainstreaming of electric vehicles.
Ultimately, the policy change that could most spur EV adoption and electric-car stocks may be more stringent emission and fuel economy targets. That's a stance Biden has taken.
Stricter emissions regulations would push the nation's electric-car sales over 4 million by 2030, according to Wood Mackenzie. That would mark an impressive leap from around 330,000 electric vehicles sold in 2019.
Find Aparna Narayanan on Twitter at @IBD_ANarayanan.
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