Header photo source: Donald Trump’s official website.
With the US election commanding global attention, the results are nearing a conclusive turn. Current tallies show Donald Trump with enough electoral votes to pass the decisive 270-vote threshold, essentially securing his return to the White House.
Historically, the automotive industry—closely tied to both climate policy and domestic manufacturing—has been a prime focus for new presidential policies.
Under the outgoing Democratic administration, there was a stringent stance on China’s automotive sector. US President Joe Biden raised tariffs on Chinese electric vehicles from 25% to 100% and imposed various restrictions on Chinese-connected vehicles in the US. His semiconductor restrictions also sent ripples through China’s smart vehicle industry.
Trump, by contrast, has long advocated for bolstering US manufacturing. Since his first term in 2017, he has championed policies aimed at reviving domestic production, making it central to his economic agenda.
Trump’s return now signals a mix of obstacles and new possibilities for China and the global automotive industry.
Building a tariff wall to curb Mexico
Protectionist measures for the US automotive industry have stretched as far as neighboring Mexico. Trump recently announced plans to impose a 25% tariff on all Mexican imports, with potential hikes to 50%, 75%, or even 100% if Mexico’s government doesn’t effectively reduce illegal immigration.
For Chinese automakers, Mexico has become a critical route to North America.
Direct sales to the US face tariffs as high as 100%, making Mexico a strategic workaround. Leading Chinese EV maker BYD is considering a new plant in Jalisco, Mexico, with an annual target of 150,000 vehicles, while another major Chinese automaker, Chery, is also eyeing Mexico for a facility that could produce 400,000 vehicles per year, supplying both Mexico and other North American markets.
According to Mexican government data, 415,000 vehicles were exported from China to Mexico in 2023, while Chinese automakers sold just 132,000 units within Mexico. The remainder of around 283,000 vehicles were routed to other North American markets through Mexico.
With Trump’s heightened tariffs, however, Chinese automakers may face further hurdles. A slowdown or dip in sales could derail plans to establish Mexican production hubs.
Adding pressure, Trump has announced plans for a 200% tariff on Chinese EVs manufactured in Mexico—even if these factories haven’t yet been built. This aggressive posture is already discouraging major investments in Mexico.
Industry sources told 36Kr that, just last year, several Chinese firms were pressing to open factories in Mexico within six months, yet today, even Tesla’s planned facility is on hold amid waning local government support.
Despite these pressures, executives with deep ties to North America told 36Kr that, if Trump’s aim is truly to boost US manufacturing, then building factories and creating jobs locally could align with those goals.
“We don’t need to panic too much,” one executive said.
Musk backs Trump, boosting Tesla’s prospects
Tesla’s stock jumped 13% on November 6, adding over USD 100 billion in value to reach USD 913.2 billion—a six-month high. CEO Elon Musk’s outspoken support for Trump seems to have given Tesla’s stock a boost.
Since July, Musk has poured at least USD 118 million into Trump’s campaign. During his victory speech, Trump mentioned Musk 11 times.
While Trump aims to revive shale energy, his broader manufacturing agenda aligns well with Musk’s initiatives, including Tesla’s EVs and proprietary 4680 batteries. Moreover, Tesla’s significant investments in artificial intelligence could open up new growth avenues under Trump’s administration.
In October, Tesla introduced the Cybercab, an autonomous, pedal-free vehicle, aiming to launch it in California and Texas. However, the Cybercab’s lack of traditional controls raises regulatory concerns, and it remains unclear if it can secure commercial approval.
Yet, Trump’s victory—and his support in Texas—may offer positive signals for the Cybercab’s prospects.
RELATED ARTICLE
Texas has become a central hub for Musk’s ventures. Tesla’s largest factory is in Austin, Texas, and in July, Musk moved the headquarters of both SpaceX and xAI to the state. Beyond the Cybercab, SpaceX and xAI—previously constrained by regulations—could now receive broader government support.
Tesla’s other critical market, China, might also see changes. During Biden’s tenure, Tesla’s relationships with Chinese suppliers were marked by caution. According to 36Kr, Tesla pulled back certain design and development rights over the past two years.
Tesla’s autonomous driving software, Full Self-Driving (FSD), also faced hurdles in China. As Chinese EVs gained ground, Tesla’s market share there fell from 16% in 2021 to 6.4% by September 2024.
With Trump in office, some of these limitations may ease for Tesla. Recently, 36Kr reported that over 20 senior Tesla engineering executives visited China to meet with EV and component suppliers.
If Musk can leverage political ties across the US and China post-election, he could accelerate FSD’s rollout in China and refine Tesla’s strategy in the Chinese supply chain—moves that would help Tesla hold ground against intensifying local competition.
North American and Chinese markets face reevaluation
Following the election, European and Japanese automakers find themselves bracing for impact.
Currently, 8% of vehicles sold in the US by Mercedes-Benz and BMW are manufactured in Europe, while Porsche relies entirely on European factories for US sales.
Last week, Morgan Stanley released a report suggesting that a Republican administration could increase tariff risks for EU exports, with German automakers likely bearing the brunt.
During his campaign, Trump expressed his desire to attract foreign manufacturers to set up shop in the US. “I want German car companies to become American car companies,” he said, advocating for them to build factories in the US.
Morgan Stanley’s report suggests that setting up US-based factories to avoid tariffs would be challenging for European automakers. Even with a tax rate cut from 21% to 15%, establishing local production for luxury vehicles would neither be simple nor significantly enhance their price competitiveness in the US market.
Changes in US and EU tariffs, in tandem with Trump’s tepid stance on EVs, will make it increasingly difficult for European automakers to thrive in the US. Automakers like Mercedes-Benz, BMW, and Porsche may turn to China as they speed up their transition to EVs.
Japanese automakers face even greater challenges.
Amid China’s rapidly growing automotive market, Japanese carmakers have maintained strong sales and profits, largely due to the yen’s depreciation and Japan’s substantial US market share of 35.5%, second only to American brands at 43.5%.
Trump has openly criticized the yen’s devaluation, calling it a “disaster” for US export competitiveness.
If Trump pressures Japan to strengthen the yen, Japanese automakers’ edge in the US could weaken, forcing them to reconsider strategies for both the Chinese and US markets to sustain Japan’s automotive industry.
These factors will likely drive Japanese and German automakers to allocate more resources to China.
Chinese brands, meanwhile, have made significant inroads, particularly in the budget segment. Over the past year, BYD’s Seagull model has outsold Dongfeng Nissan’s Sylphy. In the SUV category, BYD’s Yuan Plus and Song Plus have also overtaken competitors.
In the premium segment, vehicles such as the Li L9 and Aito M9, priced above RMB 400,000 (USD 56,000), have shown steady sales growth.
For Japanese and German automakers to stay competitive and protect their transition strategies, investing further in China may be crucial. China’s automotive market, in this landscape, is bracing for an even fiercer showdown ahead.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Xu Caiyu for 36Kr.