How Will Tariffs Reshape the Electric Vehicle Market?

Impact on EV Production Costs

Ford and Tesla are actively working to reduce EV production costs through new battery technologies, production innovations, and efficiency improvements. However, achieving significant cost reductions remains challenging, especially with potential tariff impacts on raw materials and components.

"Despite losing $2.1 billion selling EVs in 2022, Ford Motor Company (NYSE:F) is doing its part to bring its costs down, starting with opening a lithium-iron-phosphate battery plant in Michigan that could bring the high costs of EVs down." --- (F, press release, 2024/04/22)

"And then once you reach production, to improve the cost of goods by 20% is harder than reaching production in the 1st place." --- (TSLA, event transcript, 2024/06/13)

"So that's what drove most of the cost increase in the quarter. We're on track to deliver the $2 billion of cost reductions we talked about at the beginning of the year of raw manufacturing costs, material costs as well as freight and overhead." --- (F, earning call, 2024/Q1)

"We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth." --- (TSLA, sec filing, 2024/Q1)

"In fact, we delayed the launch of our three-row crossover, which is a great product, two years, not only to match the slower growth in EV, but more importantly, to take advantage of new battery chemistry and formats to substantially reduce the cost of the batteries for that vehicle." --- (F, earning call, 2024/Q1)

Supply Chain Disruptions and Production Costs

Automakers are bolstering supply chain resilience by stockpiling materials, increasing capital expenditures, and strengthening supplier relationships to mitigate disruptions and rising costs due to tariffs.

"In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles." --- (F, sec filing, 2024/Q1)

"At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability." --- (TSLA, sec filing, 2024/Q1)

"And so we've built a robust supply base, a supply chain team that not only is responsible for curing those supplier relationships and putting in place those contracts, but importantly also ensuring the development of those components and the launch of those components are at the quality levels that will support a the rapid ramp-up of our plan." --- (RIVN, earning call, 2024/Q1)

"...with everything that's happened over the last several years with COVID and then with the supply chain issues around the chip shortage and then just broad supply chain issues, we have worked and really strengthened the resiliency of our supply chain, and we'll continue to do that." --- (GM, earning call, 2024/Q1)

"That sounds optimistic, but do you think the supply chain or parts of the supply chain will be able to kind of deliver the cost that they need?" --- (F, conference, 2024/05/30)

Pricing Strategies in Response to Tariffs

Automakers are adjusting their strategies in response to tariffs, with NIO and GM maintaining disciplined pricing, while Ford focuses on affordability and profitability. Rivian anticipates cost impacts from China tariffs, and NIO uses promotions instead of price cuts to navigate market pressures.

"Of course, we will also adjust our directions and strategies according to the latest change on the tariffs of products." --- (NIO, earning call, 2024/Q1)

"And then as I mentioned, we'll see more of it fully take effect in 2025. And then would you expect the most recent round of China tariffs to impact your cost at all?" --- (RIVN, conference, 2024/06/11)

"and the fact that in many segments we're growing share. So I think that discipline is really enabling us to, I think, maintain over the mid and longer term our pricing strategy and that discipline is what we are going to operate to." --- (GM, conference, 2024/05/30)

"that smaller footprint with that flexible platform, starting out in that $25,000 to $30,000 price range, we can create a vehicle that's going to be profitable and will allow us to meet the needs of those consumers with those top hats off that flexible platform and allow us then to meet our compliance requirements that we have coming and fill the market demand that's going to be out there." --- (Ford, conference, 2024/06/11)

"We are offering some promotions like Battery as a Service policy promotions were some trading incentives for the ICE part users, but no price reductions on the product." --- (NIO, earning call, 2024/Q1)

Market Competition and Tariffs

Market competition in the EV sector is intensifying, with companies like NIO, GM, Tesla, and Rivian adapting their strategies to maintain their positions. While tariffs are not explicitly mentioned, the competitive landscape and operational adjustments suggest that tariffs could significantly impact market dynamics and strategic decisions.

"Yeah. But considering the intensifying market competition, we will also be more flexible on sales policy to make sure our market position is secure. Thank you, Tim." --- (NIO, earning call, 2024/Q1)

"So taking a step back, EV demand has been somewhat disappointing in the U. S. The global EV market seems incredibly competitive with some new EV players rising, especially from China and established global players like yourself in the middle of an EV transition." --- (GM, conference, 2024/06/11)

"controversies that Tesla must face and overcome, including softening sales, advancing competition, split focus in leadership, a 30% drop in stock price, reduced market cap, mass layoffs, human rights violations, and ongoing legal challenges." --- (TSLA, event transcript, 2024/06/13)

"And so we're driving significant operational efficiency into the production and we're continuing to watch the broader market backdrop and competitive landscape as we think about what would signals need to be for us to add incremental capacity prior to the launch of R2 in the first half of twenty twenty six, which will come online within our normal facility as well." --- (RIVN, conference, 2024/06/11)

"CEO and CFO Comments "Despite the intensifying market competition, NIO's premium brand positioning, industry-leading technologies, and innovative chargeable, swappable, upgradeable' power experience have been recognized for their exceptional competitiveness, leading to solid sequential growth in vehicle deliveries in recent months." --- (NIO, press release, 2024/06/06)

Consumer Demand Shifts Due to Tariffs

Companies are prepared to adjust production targets and implement dual shifts to meet fluctuating consumer demand, which may be influenced by tariffs. This flexibility highlights their readiness to respond to market changes and maintain competitiveness in the electric vehicle market.

"We may also arrange dual shifts in certain production lines or sections to fulfill the demand of both brands and the products." --- (NIO, earning call, 2024/Q1)