EV Makers’ Course Hinges on U.S. Election and Fuel-Economy Rules

Source: By Esha Dey, Bloomberg • Posted: Tuesday, November 3, 2020

Tesla will be an obvious beneficiary of any big policy changes in the sector that drive faster adoption of electric cars.
Tesla will be an obvious beneficiary of any big policy changes in the sector that drive faster adoption of electric cars. Photographer: David Paul Morris/Bloomberg

Both of the major-party presidential candidates have said they support electric vehicles, but a Joe Biden win could bring changes to significantly speed up the adoption of cars and trucks built by the likes of Tesla Inc. and Nikola Corp.

Most transportation experts envision a future with road travel dominated by electric-powered autos. The outcome of the election could determine whether it takes a decade to get there, or much longer.

Biden’s plan for the industry includes building more than a half-million charging stations by 2030, restoring the full electric-vehicle tax credit and instituting stricter regulations that would encourage the use of electric-powered autos. President Donald Trump is expected to maintain the status-quo — which has included loosening fuel emission standards and a plan for building a smaller number of charging facilities.

“A Biden win, coupled with Democrats taking control of the Senate, has the potential to shift the trajectory of electric vehicle adoption for years while reversing some of the damage inflicted by the current administration,” a team of Bloomberg New Energy Finance analysts, led by Aleksandra O’Donovan, said in a report published last week.

The most crucial difference between the candidates with respect to the electric-vehicle industry is their position on fuel-economy standards. The Trump administration eased Obama-era targets and offers little support for electric vehicles, calling for 5% of U.S. auto sales to be electric in any year from 2022 to 2026, according to BloombergNEF. Under Biden’s proposed, more stringent rules, the EV share of passenger vehicle sales would have to hit at least 25% by 2026, with electric-car sales reaching 4 million per year.

“It may be that electric vehicles are the future, but the pace at which that happens could change a lot,” JMP Securities analyst Joseph Osha said in an interview. There is also “much more ambitious language” from Biden’s campaign about encouraging specific things such as EV supply chain, de-carbonization and long-haul power lines, Osha said.

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Palo Alto, California-based Tesla, being the front-runner in the EV race, will be an obvious beneficiary of any big policy changes in the sector that drive faster adoption of electric cars. However, startups including Nikola, Workhorse Group Inc., Lordstown Motors Corp. and China’s Nio Inc., which have already seen their U.S.-traded shares soar in recent months, also have a lot to gain.

For more: These Are the Stocks to Watch in a Biden Sweep: Election Guide

Battery technology and lithium stocks have lagged the electric car makers this year

Suppliers to these companies, a much more streamlined group compared to the traditional automakers, could also reap the benefits of a Biden presidency. Battery makers such as LG Chem Ltd., Panasonic Corp. and Contemporary Amperex Technology Co., as well as battery metal companies Albemarle Corp., Livent Corp., Lithium Americas Corp., Sociedad Quimica y Minera de Chile SA and Tianqi Lithium Corp., could get a big bump from a Democratic win. In fact, earlier this month the Biden campaign privately told U.S. miners it would support boosting domestic output of metals used to make electric vehicles and solar panels, according to a Reuters report.

Lithium and battery stocks have significantly underperformed the car companies’ shares this year, suggesting they hold the potential for greater gains for investors once any decisive policy is announced.