Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Electric Vehicles

Trump’s Tariffs Could Hurt Gas Cars More Than EVs

Let’s talk about car parts.

Donald Trump.
Heatmap Illustration/Getty Images

If President Trump’s proposed 25% tariffs on Mexico and Canada — which were set to begin tomorrow morning before the two countries’ leaders negotiated 30-day delays — were to go into effect, they would hit automotive supply chains like a lightning bolt. A single spring inside a fuel pump can zig-zag across the northern and southern U.S. borders half a dozen times before making it into a vehicle. The jolt of tariffs would follow it, gathering force at each crossing before shocking car buyers with higher prices.

Electric vehicles, however, famously do not have as many parts as conventional cars. There’s no engine, transmission, exhaust system, or fuel pump. EV drivers will also not have to contend with the effect of tariffs on the price of gasoline. So does it follow that, despite Trump’s wish to undo Biden’s EV subsidies, he would actually be making battery-powered cars more competitive?

Experts I spoke with agreed that EV manufacturers might be somewhat less exposed. But the tariffs will still affect them, and the small edge could be outweighed by other Trump administration policies.

An internal combustion engine vehicle can have 20,000 to 30,000 parts, Amy Broglin-Peterson, an expert in automotive supply chains at Michigan State University, told me; an electric vehicle might have anywhere from several hundred to a few thousand. Many of these components are manufactured by independent specialists throughout North America. “They’ll be assembled utilizing cheaper Mexican labor, and then they’ll cross back into the U.S. and be put into a bigger assembly, which is then sent back down again for either more assembly work or finished vehicle production,” she said.

Electric vehicles also contain many of the same complex components as conventional cars, like seats and lights and dashboards and radios and mirrors. “That’s kind of the great equalizer amongst these different vehicles,” Mike Wall, an auto analyst at S&P Global Mobility told me. “They’re all going to be in the same soup in terms of vulnerability to cross-border trade.”

But EVs lack the most complex component of all — the engine. Instead, EVs have a battery, and many automakers are either already producing their batteries in the U.S. or are building new factories to do so. As of December, there were more than 80 facilities making battery components, assembling battery packs and cells, manufacturing drive units, producing EV chargers, and doing final EV assembly in the U.S., according to a database maintained by Wellesley University historian Jay Turner. But that’s set to increase over the next few years due to tax incentives and grants that were part of Biden’s Bipartisan Infrastructure Law and Inflation Reduction Act, which reward domestic manufacturing of clean technology components. More than 200 additional facilities, including critical mineral extraction and processing facilities, are in various stages of development.

Broglin-Peterson told me her quick answer to my question is that EVs likely wouldn’t be hit quite as hard by tariffs as conventional cars. But she emphasized that they will still see an impact, and she wasn’t sure of the extent to which other Trump administration policies would undermine any tariff-related advantages. “The EV picture right now has become a lot more murky, obviously, since President Trump was elected,” she told me. “I do think the traditional automakers are more heavily leveraged, though, on their internal combustion engine supply chains.”

Wall agreed that EVs were somewhat less exposed, but he said it really depends on which internal combustion engine vehicle you’re comparing them to. Some engines are assembled in the U.S. and have more U.S.-manufactured components than others. Battery makers are still vulnerable, as the processing of the critical minerals that go into EV batteries is currently heavily concentrated in China, which will also be hit by 10% tariffs on top of existing tariffs on Chinese goods. When you take into account the president’s plans to end the electric vehicle tax credit and leasing option, which can shave up to $7,500 off a car’s sticker price, EVs could still end up less competitive than before Trump took office, Wall said.

Some electric vehicle producers will be hit harder than others. Tesla, for instance, has one of the lowest exposures to non-U.S. content, according to data collected by the Department of Transportation. But some 20% to 25% of Tesla components come from Mexico.

“There’s a lot of uncertainty around tariffs,” Vaibhav Taneja, Tesla's chief financial officer, said during an earnings call last week. “Over the years, we’ve tried to localize our supply chain in every market, but we are still reliant on parts from across the world for all our businesses.” The company’s stock price dropped 5% on Monday, though that may be partly because the company also lost market share in Europe.

Rivian builds its EVs in Illinois and is opening a second factory in Georgia. But the company’s CEO RJ Scaringe told Inside EVs that tariffs will still hurt. “Many, many, many hundreds of billions of dollars have been invested in Mexico in production capacity for supply chains that supply to all of us,” he said. “That will need to get remapped or will just carry higher costs.”

Other manufacturers are more spread out. Ford assembles its Mustang Mach-E in Mexico and its F-150 Lightning in Michigan. GM makes its Chevy Silverado, GM Sierra, and Cadillac Escalade EVs in Michigan, but its Equinox and Blazer EVs in Mexico. Stellantis makes its electric Jeep Wagoneer in Mexico, but recently invested more than $400 million to prep three of its Michigan factories for EV assembly.

Analysts told me not to expect any sudden moves from car companies. “Revamping the automotive supply chain to be 100% U.S. based is probably not realistic,” David Whiston, an equity strategist who covers the auto sector for Morningstar, told me in an email. “Companies right now are not willing to pivot capacity on a dime — they won’t allocate capital without more certainty.”

Trump doesn’t have much interest in certainty. After threatening to put the tariffs into immediate effect last weekend, the president quickly struck agreements with Mexican president Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau on Monday to pause the tariffs for 30 days while the countries negotiate. He has yet to discuss next steps with China.

Blue

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Electric Vehicles

Tesla’s Robo-Future Is Still Pretty Far Off

The company says its first Optimus robots will start rolling off the line in “2026.”

Hailing a Robotaxi.
Heatmap Illustration/Getty Images, Tesla

Tesla is a car company everywhere except Wall Street. It delivered some 1.7 million cars in 2024, which were built in factories in Texas, California, Germany, and China. These car sales (and leases and sales of regulatory credits) generated some $77 billion in revenue. Its gross margin on these cars is about 18.5%, or around $14 billion.

When Tesla reported its first quarter earnings, it announced a more than 70% decline in profits, continued falling sales, and ahit to its business from the trade war with China. But its stock climbed the next day, and is now trading at around $350 a share, from $238 before the report, giving it an overall value of over $1 trillion. By some metrics, Tesla makes up more than half of the overall value of the automotive industry.

Keep reading...Show less
Green
Politics

The Energy Department’s Possibly Illegal Move to Fund a Fossil-Fired Steel Furnace

At least one target of Chris Wright’s grant review may run into some sticky statutory issues.

Flags and steel.
Heatmap Illustration/Getty Images

The Department of Energy announced on Thursday that it’s reviewing some 179 awards made by the Biden administration worth $15 billion to ensure they were “consistent with Federal law and this Administration’s policies and priorities.”

But what happens when federal law and Trump’s priorities are at odds?

Keep reading...Show less
Blue
Climate

AM Briefing: Republicans Waver Over Cost, Energy Ahead of Budget Vote

On budget negotiations, Climeworks, and DOE grants

Republicans Waver Over Cost, Energy Ahead of Budget Vote
Heatmap Illustration/Getty Images

Current conditions: It’s peak storm season in the U.S., with severe weather in the forecast for at least the next six days in the Midwest and EastSan Antonio, Texas, is expected to hit 108 degrees Fahrenheit todayMonsoon rains have begun in Sri Lanka.

THE TOP FIVE

1. Republicans waver on budget ahead of possible floor vote next week

The House Budget Committee meeting to prepare the reconciliation bill for a floor vote as early as next week appears to be a go for Friday, despite calls from some Republicans to delay the session. At least three GOP House members, including two members of the Freedom Caucus, have threatened to vote no on the budget because a final score for the Energy and Commerce portion of the bill, which includes cuts to Medicaid, won’t be ready from the Congressional Budget Office until next week. That is causing a “math problem” for Republicans, Politico writes, because the Budget Committee “is split 21-16 in favor of Republicans, and Democrats are expecting full attendance,” meaning Republicans can “only lose two votes if they want to move forward with the megabill Friday.” Republican Brandon Gill of Texas is currently out on paternity leave, further reducing the margin for disagreement.

Keep reading...Show less
Yellow