In the modern wave of electric vehicles led by Tesla, subsidy policies have always been a critical force in promoting the adoption of electric vehicles globally. Especially in the early stages of technology development, subsidies effectively reduce the cost of car ownership for consumers. The Trump administration's cuts to subsidies could lead to the following three impacts. First, consumer willingness to purchase may decline as the entry barrier increases, potentially causing a drop in market demand in the short term. Second, the pressure on EV brands will rise, especially for start-ups that largely rely on subsidies to maintain price competitiveness. Without subsidies, brands may need to adjust their pricing strategies, which could impact profitability. While Tesla’s stable position may see minimal impact, other start-ups like Lucid and Rivian may face significant challenges. Third, market consolidation will intensify. Companies lacking financial or technological strength are likely to be eliminated, while brands with economies of scale could further solidify their market positions.
However, while the Trump administration’s cuts to subsidies may immediately cause the aforementioned impacts in the short term, looking further ahead, we believe this policy change might also present unexpected opportunities for the electric vehicle industry. First, brands may have to focus more on improving technology and controlling costs due to reduced subsidies, which could help reduce dependence on government support and promote market autonomy. Second, advanced technologies such as solid-state batteries, highly autonomous driving, lightweight vehicle bodies, or aerodynamics will likely receive greater attention, and brands willing to invest in these areas may stand out in free competition. Third, the upstream, midstream, and downstream players in the EV industry will need to strengthen cooperation to face new challenges together, potentially fostering closer ties among battery manufacturers, energy suppliers, and technology developers, creating a more robust electric vehicle ecosystem.
It is worth noting that while the new U.S. government has decided to cut electric vehicle subsidies, other major markets, including the European Union and China, remain actively promoting EV adoption. For instance, the EU has implemented stringent carbon emission standards, while China offers measures such as new energy vehicle credits and license plate incentives.
Thus, the short-term impact of the new U.S. policy warrants close observation. We believe brands aiming to strengthen their presence in the electric vehicle industry should maintain their R&D pace and build their capabilities to address the challenges posed by policy changes.