With Donald Trump set to take office again, he is busy selecting new members for his administration. This brings new information about the initiatives these officials will pursue. The implications for the auto industry are becoming clearer, especially regarding unions and an upcoming renegotiation of the North American trade deal with Mexico and Canada, as the industry adapts to advancements like electric and autonomous vehicles. In this evolving landscape, one company stands to benefit significantly: Tesla.

Elon Musk, the CEO of Tesla, was a prominent supporter and financial backer of Trump’s campaign, which might grant him some influence in the upcoming administration. However, it’s Trump’s regulatory proposals concerning vehicles and artificial intelligence—many of which were proposed before Musk became involved in the campaign—that are expected to benefit Tesla. Let’s explore this further:

Trump’s Position on Self-Driving Cars

A recent Bloomberg article states that the Trump transition team has prioritized self-driving vehicle legislation, aiming to establish a federal framework for regulating these cars on American roads. Instead of relying on the National Highway Traffic Safety Administration or the Department of Transportation, this bipartisan proposal seeks to present new rules to Congress that would facilitate the widespread adoption of self-driving cars.

During Trump’s initial term, a proposal to increase the cap on a company’s self-driving cars from 2,500 to 100,000 passed the House but failed to get through the Senate. This might serve as the basis for the Trump administration’s renewed efforts in its upcoming term, although a new Secretary of Transportation has not yet been appointed.

Tesla’s Potential Advantages from New Self-Driving Regulations

Elon Musk has been an influential donor to Trump’s 2024 campaign and has openly supported him throughout. Musk has stressed the urgent need for the government to frame regulations for the mass adoption of self-driving vehicles, which Tesla purports it will be able to roll out in the next few years.

This includes Tesla models currently equipped with Autopilot and Full Self-Driving capabilities, which can be upgraded once the technology is finalized. Furthermore, there’s the recently unveiled Tesla Cybercab, which does not have any traditional controls like steering wheels or pedals.

Tesla seems to be in a prime position, assuming its claims about technology safety hold true. It currently has implemented technology on the road, distinguishing it from competitors like General Motors and Ford, which also only have driver assistance features available at this stage (GM temporarily paused its Cruise self-driving program after an incident involving a pedestrian). Although other self-driving companies like Waymo might have advanced technology, they lack the mass production capability that Tesla possesses. Essentially, Tesla combines nearly ready technology with the ability to scale production, enabling it to swiftly adopt next-gen innovations, such as the Cybercab. swift passage of new regulations by Trump’s administration could allow Tesla to execute parts of its autonomous vehicle plans almost right away,

While no other car manufacturer or technology firm can claim the same advantage, this would provide Musk and Tesla with a significant boost similar to the one they received with electric vehicle (EV) technology, allowing them to maintain their leading position in the industry.

The future is expected to be fully software-driven, emphasizing the importance of Over-the-Air (OTA) updates as advanced driver assistance and self-driving technologies become widely adopted. These updates could be implemented in vehicles already equipped with the necessary camera and sensor technology, particularly if a new government policy supports the deployment of this technology in upcoming car models.

What is Trump’s position on electric vehicles?

The upcoming Trump administration has reportedly hinted at intentions to reverse President Biden’s current regulations and tax breaks for electric vehicles, likely moving away from incentives for EVs altogether, as Trump does not endorse climate and environmental protection initiatives.

This shift could lead to several years of higher prices for electric vehicles, without the relief offered by tax credits that help close the price gap between electric and gasoline-powered vehicles, potentially taking time for the overall costs of EVs to decrease. As a result, expect traditional car manufacturers to increasingly pivot towards hybrid vehicles. These vehicles typically require fewer EV-specific components, while still providing practical benefits, refinement, and efficient performance in the next generation of cars. We anticipate that major automakers with existing commitments to electric vehicles will continue on their current paths, as most have already adapted to the evolving dynamics of the expanding EV market. They have made substantial investments and have plans in place, so fluctuating regulations are unlikely to prompt immediate changes to their business strategies. However, should regulations promoting EV manufacturing be repealed, automakers may no longer incur penalties for failing to meet average fuel economy standards.

It may initially seem that eliminating the EV tax credit or lowering fuel economy-related penalties on traditional manufacturers would harm Tesla, but this is unlikely. Although the tax credit may appear to be negative for Tesla, it poses a greater challenge for its competitors, who have struggled to produce competitive electric vehicles in terms of performance, range, and appeal at comparable prices. Tesla remains the most recognized EV manufacturer and offers some of the most cost-effective long-range electric vehicles available—even without the tax credit—and maintains profitability. Meanwhile, traditional manufacturers already facing financial challenges with their electric cars will find it even harder to capture the market without the incentivizing $7,500 tax credit to attract potential customers.

What changes will Trump make to the US-Mexico-Canada Free Trade Agreement?

President Trump will have the unique opportunity to renegotiate two North American free trade agreements. The current USMCA was established during his first term, creating specific trade guidelines between the U.S., Mexico, and Canada, with several provisions directly benefiting the automotive industry, which has a significant presence across the continent. Given the current political climate surrounding the US-Mexico border, it remains uncertain how the next round of negotiations will unfold, the duration they will take, or the potential changes in their content. Nevertheless, Trump will be part of the process again, and the automotive sector—having increasingly established factories just over the border—has much at stake.

Any negotiations will likely aim to shift manufacturing within North America back to the U.S., which could impose significant adjustments for certain automakers if realized. Notably, Tesla manufactures all of its vehicles destined for North America (along with its batteries) in the United States. Thus, Tesla is unlikely to be adversely affected personally; instead, it might gain from the challenges faced by its competitors who will need to reevaluate their operations in Mexico or Canada.