The Trump EV plan is based on the argument that the U.S. is in an energy emergency.
But nothing could be further from the truth.
In fact, the energy economy of the U.S. is stronger than it’s ever been. We’re the largest producer of oil and gas in the world. U.S. exports of LNG are at an all-time high, and rapid growth is expected to continue.
The price of oil is clocking in at around $74 a barrel, which is not considerably high. Adjusted for inflation, this is pretty much the average price. And gas at the gas stations is running at a three-year low.
As well, with the integration of renewables and energy storage, the security of our energy economy has never been stronger.
There’s not a single data point that can validate the claim that the U.S. is in the midst of an energy emergency. So why would the president declare one?
I suppose there are any number of reasons. Ranging from exacting revenge on former president Biden to doing the oil & gas industry a solid. The latter, of course, is not something exclusive to Trump. Plenty of previous administrations have catered to Big Oil. But in the past, the U.S. was not operating as a global oil & gas behemoth. Today, it is.
Still, you’ll find no oil & gas executive complaining about Trump’s desire to bypass regulatory hurdles. This, in an effort to open up more federal lands to drilling. But that doesn't mean the industry wants to put more oil out into the market. This would push the price of oil down even further. And any sustained period where oil is trading in the low-to-mid 60s will result in oil companies scaling back their drilling.
Indeed, Trump is certainly a gift to Big Oil. But I don’t see any evidence that opening up more federal lands to drilling will spark a rush to drill on those lands. At least not in the near-term.
Meanwhile, as the President touts his superfluous gift to the oil & gas industry, he’s also offering a proverbial middle finger to the EV industry.
Why the Trump EV plan is a non-starter
As you know, shortly after taking office, Trump signed a series of Executive Orders, with a directive in one called “Unleashing American Energy.” Part of that included the elimination of the $7,500 federal tax credit for EV buyers. While I agree that such tax credits are at odds with free market principles (and should not exist), this tax credit has helped car makers sell a lot of EVs Eventually, and really in the not-to-distant future, EVs will be cost competitive with their gas-powered counterparts. And in the absence of those tax credits. I predict we’ll be there within the next three to five years.
But from an investment perspective, we have to consider how this affects our investment strategy this year.
A lot of our readers are quite bullish on EV and EV-related companies these days. This, after making quite a bit of money already with stocks such as Tesla (NASDAQ: TSLA), BYD (OTCBB: BYDDY), and Silvercorp Metals (NYSE: SVM). The question now, of course, is: without these tax credits, is the EV market about to get knocked on its ass?
The answer to that question is “not even a little bit.”
First of all, despite Trump’s hatred for EVs, the global market for cars and trucks is already transitioning to electrification. Particularly in China, where almost half of all new cars sold are electric. And that number will exceed 50% in 2025.
China has also been successful in exporting its EV dominance throughout Latin America, Southeast Asia, Europe, and Australia.
Indeed, it's not uncommon to see electric cars on American roads these days. But the U.S. is still a bit of a laggard in terms of EV adoption. And without those federal tax credits, U.S. sales of EVs would likely slow quite dramatically. But here’s the rub …
Most legal scholars and industry experts agree that Trump cannot eliminate those tax credits without approval from Congress. And while there are typically enough republicans in congress to give Trump what he wants, this one may be different. You see, there have been massive investments in EV and EV battery manufacturing in republican-controlled states. We’re talking billions of dollars invested. And tens of thousands of jobs created as a result of the ultimate transition to vehicle electrification.
They won't discuss it in public. But most of the senators and congressmen from those states will vote against anything that could derail those investments in their states.
To be clear, the intention of this article is not to bash Trump. It’s simply to clear the fog of confusion, and in some cases, misinformation coming out of the mainstream news streams.
Love him or hate him, his intentions on energy and transportation have been quite clear. But intentions don’t always equal desired results. Which is why I would encourage you to not make any sudden moves based solely on that which you see in a tweet or on social media, where a lot of the analysis of Trump’s plans for energy and transportation are not being accurately dissected.
