Thomas: Hello, and welcome to the latest episode of "Argus Metal Movers," where we unpack the latest moves in global metal markets. I'm Thomas Kavanagh, editor of "Battery Materials." And today I'm joined by our battery reporter Chris Welch.
Chris: Hi, Tom.
Thomas: And metals reporter Maeve Flaherty.
Maeve: Hello.
Thomas: And we're going to discuss the impact of President Donald Trump's second term on battery metals and the EV sectors, and what his policies will mean for critical minerals and the future of electric vehicles.
So since the inauguration this week, we've seen a raft of executive orders from the new President. His order titled "Unleashing American Energy," which is mainly directed towards oil, but also mentions critical materials, which is our bread and butter here at Argus. And what is Trump trying to do with this policy, Chris?
Chris: Hi, Tom. Yeah, I think it's really interesting. I think we've got two conflicting parts of this policy. We've got Section 9, restoring America's mineral dominance, which looks at critical minerals, which may or may not be part of the energy transition. Non-fuel minerals, including rare earth minerals, that may also be used to "establish" our position as the leading producer.
So on the one hand, it looks like the U.S. is going to continue its investment into clean energy under Trump, as it was under Biden. And then, on the other hand, we've got a separate move to further increase the U.S.'s oil production. The U.S. is already the global leader in oil far ahead of the next biggest producers, Russia and Saudi Arabia. So it seems that there may be a clash of ideologies here. And with different special interests as well, it may be something that causes friction.
It's worth noting that the Inflation Reduction Act under Joe Biden's time has been set to create a substantial number of jobs. Under one estimate, it's set to create over 800,000 jobs across industries. Another study estimated that there has been a 14% increase in clean energy workers since the enactment of the IRA in August 2022. Many of these jobs in California, Texas, and New York. So in terms of job creation, the IRA is set to be incredibly beneficial as that comes into place. But, of course, there are ways in which that can be repealed as well, which we can go into.
Thomas: Yeah, it seems there's a little bit of everything everywhere all at once in this policy. You know, we're going to be a leader on oil, we're going to be a leader on critical minerals. But at the same time, undercutting the downstream with undercutting the rest of the Inflation Reduction Act and Infrastructure Act provisions. I wonder, how feasible is it for the U.S. to become a leader on critical minerals and take on China in that sphere?
Chris: I think it's an enormous task. If we look at the battery supply chain, well, the electric vehicle supply chain from top to bottom, so we've got mining, refining, cell making, battery making, and car making. So far, the U.S. has a substantial share of the electric car making, around 10%, not insignificant, and a slightly smaller share of the battery making in the world, but it is lacking substantially in the mining and refining of those battery materials.
And to go along with that, a lot of the investment under the Inflation Reduction Act has once again been focused in those downstream sectors of battery making and car making. So while the U.S. may be safe, if it comes to battery making and car making, it is still substantially dependent on several countries abroad, such as China, in particular, for those materials upstream.
Thomas: And looking at the electric vehicle market now, just moving away from critical materials, downstream, the EV market, Trump's got the EV mandate in his sights. Does this $7,500-a-year subsidy on EVs matter? Because we've seen that Elon Musk says maybe not. So he's fine with it going away, and he's fine with the mandate going away as well.
Chris: Yeah, I think that's really important. And I think this may be the most concrete of Trump's plans to roll back on clean energy, so to speak. Specifically, the tax credit that you're referring to is a maximum of $7,500 as a tax credit for new EVs, or $4,000 for secondhand EVs. This is offered to consumers of models with 40% content from countries with which the U.S. has free trade agreements, one of those not being China, for example.
And I think there's a real clash here as to whether an incentive like this really matters. On the one hand, incentives do matter. Germany pulled its purchasing subsidies at the end of 2023. That was a smaller subsidy, €4,500. And through 2024, we saw a substantial reduction in sales, 27%, as the UK became the largest EV market in Europe.
Similarly, in China, sales shot up around 40% last year. They have subsidies, a trade-in subsidy, trading in your old cars for new EVs of around $2,500 per unit. So a smaller subsidy than in Germany, but they've had a larger sales growth.
But there's another side to the argument as well. At the World Economic Forum in Davos this week, the co-chair of CATL, the world's largest battery maker, said that subsidies really have a limited effect. It's about the private sector. It's about an integrated supply chain of cheap local feedstock materials. It's about a charging network, which the U.S. is lacking in at the moment. Around a quarter of all of its charges have been installed in California. It hasn't been spread out so much.
And not only that, but the Inflation Reduction Act tax credits, under one estimate, around 75% of the subsidies claimed went to consumers who were going to buy an EV anyway. In other words, only one in four consumers switch their choice to an EV as a result of the subsidy. This means that the subsidy isn't really costing $7,500 per consumer. It's costing four times that, or $32,000 per new EV. That's an incredibly expensive policy for the taxpayer. And it's why we can see that if Trump is looking to impose tax cuts, to be able to justify those and reduce spending as well, one area in which he might want to reduce spending is on those tax credits.
Research suggests that the ROA would have been far more beneficial if it actually distinguished its tax credits and provided larger credits to cleaner EVs, such as a Volkswagen ID series EV instead of a Tesla Cybertruck, which while it being electric...
Thomas: Right. Instead of the smaller version, yeah.
Chris: ...is incredibly polluting. Yeah, yeah, yeah, exactly. So it's a bit of a blunt instrument and also an expensive one as well, which has caused some upset on the other side. And none of this really goes into whether special interests such as Elon Musk may also be behind this. Tesla still contribute to around 50% of U.S. car sales, U.S. EV sales, I should say. They're very established. They can produce, at least in the U.S., turning a profit.
Opening up the market with subsidies to other car makers may actually reduce Tesla's market share and may not benefit Tesla and therefore Musk. So there's a real spectrum of opinion. And it's not clear whether these subsidies made a difference and whether they did, perhaps it was a bit of a blunt instrument as well.
Thomas: A bit of a shrewd business move, maybe on Elon Musk's part. Maeve, resident American on the podcast today. I guess we've just discussed whether, you know, the uptake of EVs is really subsidy-related or whether it requires a larger cultural shift. Now that we've seen Trump come in based on sort of an anti-ESG EV wave, I mean, what makes America so uniquely anti-EV in the world?
Maeve: Well, I mean, I think as an American, we grow up with this real understanding that American manufacturing and the greatness of America as a country was largely built out of, you know, our heritage in automobiles, Ford inventing the assembly line. And there's a real obsession in America with cars, with our automotive sector, and in general with it as something fundamentally American. And frankly, you know, electric cars, all these sort of green ideas are largely seen as sort of European and elite and associated with this class of people that are urban and fundamentally different from the traditional American.
And so in a country where a car is one of the most fundamental signifiers of who you actually are as a person, there's a real hesitation to adopt electric vehicles and a real sort of mockery of the person driving a Prius and, you know, stereotypes around that. And so I think it becomes really difficult, even with financial incentives, to convince people to really invest in EVs and adopt, you know, this sort of electric vehicle lifestyle, because it's seen as not just a tool, but an actual lifestyle that many don't have any interest in or don't feel reflects them and their identity as American.
Thomas: And it's interesting, we've seen this kind of almost a right-wing cultural backlash towards the Green New Deal, or the Green Transition, as it's called. Do you think that it could swing back the other way? Do you think there could be a backlash or resistance to Trump's sort of anti-environmentalism?
Maeve: Yeah, I think in the near term, that's very unlikely. You know, President Biden was supposedly a more, you know, green President, and actually in practice was largely very pro-fossil fuels. And, you know, it was not really this sort of green economy that people want to see. So there have already been people protesting, people pushing for a more, you know, green approach to the economy. And that hasn't really taken even with a Democratic President. And so I don't see that changing under a Trump presidency. And I don't see that changing in the general public, because there is a real association of environmentalism with these urban elites who are currently, you know, the most unpopular people in America.
And so it is unrealistic, in my opinion, as Trump moves farther away from a greener approach, that people will react to that negatively. If anything, I think that it's going to really take hold more. And then where you see that kind of being complicated is when you're looking at this idea that Trump wants to create, you know, an America that's really strong in critical materials.
Well, America is really intense bureaucracy. Building a mine takes 10 to 15 years. And even though, you know, a Democratic President might be pro the idea of having more critical materials from an environmental perspective, they're not going to want to go against the constituencies that are really against building a mine in, you know, Indigenous lands, in people's backyards.
So anyone investing in a mine can't trust that it would actually be able to get through under a blue President. At the same time, if you only have a red presidency for the next four years, you can't assume that there will be... You know, I mean, it's hard to invest in a mine that's 10 to 15 years to build if you don't have real security of who's going to be in charge. And in America, with the layers of bureaucracy, it's simply hard to plan. So I don't think that on either side, we're really going to see a pick up in critical materials in the States, which is unlikely.
Thomas: Concerning for the industry as a whole at the moment. Well, that's all we have time for today. Thanks for listening to "Argus Metal Movers." If you would like to find out any more about Argus's prices or analysis, please visit www.argusmedia.com. And we'll see you next time. Thank you.