Three Ballot Boxes are in a room with an American Flag

Election years always raise a lot of questions about how different outcomes will affect specific industries and trends. Right now, one of the primary questions everyone wants answered is, "How will the 2024 election affect the economy?"

There's no way to predict what the economy will look like after this year's election. However, analyzing each party's policy proposals gives insights into how the election will affect individual sectors, like the automotive industry. Here are some predictions about the 2024 election’s impact on the automotive market.

Current Consumer Sentiment Pre-Election

As the 2024 election nears, 75% of car shoppers expect the election to affect the economy¹. There's uncertainty about what the economy will look like after the election. Since buyers expect change but don't know exactly what it will look like, many are currently adopting a "wait-and-see" approach. They're not ready to commit to buying a vehicle right now, preferring to see what happens with the election first.

The Federal Reserve, the nation’s central bank, cut interest rates by 50 basis points in September¹, which may influence consumer sentiment in the months ahead. For example, car shoppers might be able to afford more expensive vehicles while staying below their monthly car payment budget. Conversely, if inflation and car prices rise despite the Federal Reserve’s actions, they might not be able to buy the same vehicle they can afford now. Inflation is currently the top concern of vehicle shoppers³. After new and used car prices rose dramatically during the COVID-19 pandemic², it's no surprise shoppers are still worried about the possibility of inflation affecting vehicle prices. Around 60% of consumers say November's election will affect their next vehicle purchase², and how the results will affect those purchases remains to be seen.

It’s important to note that the Federal Reserve is an independent government agency and separate from the political parties, and the board’s responsibilities are mandated by Congress. Their monetary policies must promote maximum employment to maintain a sustainable inflation rate and promote stable prices for goods and services⁴. Reserve Banks across the country collect information about economic conditions and must testify before Congress about their findings and activities twice a year; this is typically when the public becomes most aware of monetary policy and how it affects their lives, which can affect their choices at the ballot box.

Potential Impact of Republican Party Policies on the Automotive Industry

Based on policy proposals and statements from Republican Party officials, these are predictions about the effect of a Republican win in the presidential election.

Environmental Policies

Former President Donald Trump, the Republican nominee, has consistently criticized environmental regulations, including those affecting the automotive industry. During his term in office, his administration eliminated or weakened over 125 environmental rules and policies³, arguing in favor of deregulation to promote economic growth. If he wins the presidential election in November, Trump's administration will likely roll back fuel economy requirements and emission standards that vehicles must currently meet⁴. Less stringent environmental requirements in the automotive industry could make producing vehicles cheaper, leading to savings for customers.

Trump has also publicly favored internal combustion engines (ICEs) over electric vehicles (EVs), claiming that EVs "don't go far enough" and are "too expensive⁶." His administration would likely end or at least limit subsidies for electric vehicles, making it much more difficult for the EV market to grow. However, this shift may be in line with public sentiment: EV sales have been slower in 2024 than previously anticipated, suggesting a disconnect between the enthusiasm of early adopters and the broader auto market⁷. As EV sales have slowed, hybrid vehicles have gained traction and may exceed earlier forecasts, particularly within the used car market⁸.

Trade Policies

During a campaign speech, Trump recently called for a 100% tariff on foreign vehicles⁹, specifically implying the tariff would apply to vehicles and vehicle parts from Mexico. The goal of imposing such high tariffs is to support domestic vehicle manufacturing, protect American automakers against foreign competition, and create jobs in the U.S.

However, U.S. manufacturers commonly use imported vehicle components to make their vehicles. Tariffs on these components would force U.S. automakers to either pay higher prices for the imported parts or find ways to produce them domestically. As a result, these tariffs would likely increase inflation and raise the prices of domestic vehicles as manufacturers pass those higher costs onto customers¹⁰.

Policies on Investment in Manufacturing and Research and Development

In a recent campaign speech, Trump proposed expanded research and development credits for manufacturers based in the United States¹¹. He also suggested he would appoint a "manufacturing ambassador" to convince manufacturers to operate in America. While he did not specifically reference automakers in these comments, such proposals could apply to the automotive industry. In that case, the increased investment in R&D through credits could decrease costs for automakers, potentially leading to new vehicle features and lower costs for consumers.

Potential Impact of Democratic Party Policies on the Automotive Industry

If elected, Vice President Kamala Harris, the Democratic nominee for President, has different proposals that would impact the automotive industry.

Environmental Policies

Vice President Harris has consistently supported environmental efforts, including policies that promote the production and adoption of electric vehicles. Her administration would probably increase incentives for EV production and commit additional investment toward EV charging networks nationwide. With more charging networks, customers may feel more comfortable switching to electric vehicles since there would be fewer concerns about running out of charge.

A Harris Administration might also expand on the Biden Administration's tax credits for purchasing EVs, which offer up to $7,500 in credits per vehicle¹². Harris also outlined policies to retrain some traditional automotive workers to work in EV production. These policies would make electric vehicles more affordable and appealing to American customers, likely continuing the growth of the EV market.

Trade Policies

Harris has criticized Trump's trade policies, arguing they will raise prices for American families even higher. She says Trump's proposed tariffs would be "a national sales tax on everyday products and basic necessities that we import from other countries¹³." The Biden Administration raised tariffs on Chinese EVs to 100%, a policy Harris may continue or expand upon as president¹⁴.

The United Auto Workers (UAW) endorsed the Harris campaign in July 2024, highlighting the intersection of environmental, trade, and labor policies. The union cited the former president’s inaction when General Motors closed an Ohio facility in 2019 and compared it to the Biden-Harris administration’s support of the 2023 strikes against General Motors, Ford, and Stellantis¹⁵and commitments to facility upgrades, worker retraining, and long-term innovation goals laid out in the CHIPS Act. Although EVs have experienced fluctuating levels of popularity, car manufacturers and the automotive labor force are looking for ways to be responsive to evolving climate goals and policies.

Policies on Investment in Manufacturing and Research and Development

As Vice President, Harris announced over $100 million in funding for small- and medium-sized auto parts manufacturers in the United States¹⁶. This investment in U.S. auto manufacturing aimed to protect American automakers and autoworkers in the supply chain. Her administration also plans to expand grants for General Motors and Stellantis to convert some of their current manufacturing plants into EV parts and vehicle production¹⁷.

Prepare for a Changing Automotive Sector

No matter how the 2024 election turns out, there will almost certainly be some changes that affect the automotive industry. As a dealer, you need to be able to adapt to those changes and develop a plan to ensure your success. ACV MAX can help with tools geared toward helping dealership owners like you make better inventory decisions. Schedule a demo today to see ACV MAX in action.

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