Taylor Swift‘s endorsement of Kamala Harris for US president in an Instagram post signed “Childless Cat Lady” is having a significant impact on investors in Asia‘s battery makers. They are closely analyzing public reactions to the recent television debate between Harris and Donald Trump, searching for any indication of how the US election will unfold. One area of particular interest is electric cars, as Trump has vowed to end what he calls a mandate to sell electric vehicles if re-elected.
In recent years, EV battery makers have benefited greatly from the Biden administration’s push for an EV transition. The current US targets require around two-thirds of all new cars and trucks sold by 2032 to be electric, leading to a demand for millions of new batteries by 2030. Elon Musk’s endorsement of Trump has raised speculation that he may soften his stance on EVs, but his consistent criticism continues to worry investors in EV-related stocks.
A Trump victory is seen as potentially bringing cuts to subsidies for EV battery makers and fewer federal tax incentives for EV buyers. JD Vance, Republican vice presidential candidate, supports redirecting those credits towards gas cars instead. On the other hand, Biden’s EV push has been supported by billions of dollars in investment through the 2022 Inflation Reduction Act and energy tax credits estimated at over $1tn over the next decade.
South Korean and Japanese battery makers have been major beneficiaries of this investment. However, Chinese manufacturers have started dominating the EV battery supply chain with approximately 80% of lithium-ion battery cells being made in China. This has led to an intensifying price war among South Korean and Japanese peers as they try to compete with their Chinese rivals.
US tax credits have provided a significant advantage over Chinese competitors but caution should be exercised when investing too heavily in this sector due to historically expensive stock prices. While signs of public support for Harris have positively impacted Asian markets with shares surging for LG Energy Solution (South Korea’s largest EV battery maker), Panasonic, and Samsung SDI; actual sales figures remain disappointing.
Operating profit at LG Energy Solution fell 58% while sales declined 30% in the latest quarter. Samsung SDI also experienced a decline in sales due to weakness in their EV batteries business. Panasonic Holdings’ energy unit missed its operating profit guidance as well.
Excluding US subsidies from earnings would significantly lower results and potentially lead some manufacturers into operating losses. Additionally, global growth rates for EV sales are slowing down while concerns about overcapacity arise with China utilizing less than 40% of its maximum cell output last year despite being responsible for more than half of global demand.
Battery makers suspending construction plans highlight concerns about insufficient demand supporting current prices and output levels. As a result, investing in EV battery makers may no longer be as straightforward as it once was due to policy shifts and potential overcapacity issues.
