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Wells Fargo (NYSE:WFC) provided an update on the automotive industry following President Trump's inauguration speech. The firm outlined the key risks and anticipated timeline for policy actions affecting the sector, noting that there were no surprises regarding Trump's position on the Green New Deal and electric vehicle (EV) incentives.
In his speech, President Trump confirmed his intention to end the $7,500 Internal Revenue Code (IRC) EV buyer tax credits and pivot towards supporting fossil fuel programs. Wells Fargo analysts expect that legislation to remove these credits could be introduced by May.
They also anticipate upcoming commentary on the enforcement of fuel regulations and the waiver granted to the California Air Resources Board (CARB) within the next few weeks. Notably, Trump's rhetoric on tariffs was perceived as less aggressive than before, which could signal a reduced immediate risk to the auto industry.
The analysts predict that it could take until approximately 2028 for Trump to revise the EPA and NHTSA fuel economy regulations. However, an announcement to delay the enforcement of these regulations is likely imminent, as is the revocation of CARB's waiver, which could lead to legal challenges.
Regarding the EV buyer tax credits, Wells Fargo suggests that their termination will likely be part of the budget reconciliation process. Speaker Johnson is expected to introduce one or two bills by Memorial Day, with the credits potentially ending shortly thereafter without a grace period.
The firm highlights that the cessation of these credits would notably affect Tesla (NASDAQ:TSLA), as most of their models are currently eligible, in contrast to only 31% of non-Tesla EVs. General Motors (NYSE:GM) models are also predominantly eligible for the credits.
Lastly, the firm remarks on Trump's shift in trade policy, indicating that while tariffs are not off the table, his administration will review existing tariff and trade agreements and consider establishing an external revenue service for tariff collection. This approach suggests a more measured stance on tariffs, which if implemented, could have significant implications for vehicles and parts assembled in Mexico, particularly impacting Detroit's Big Three automakers.
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