Stressed About the Presidential Election? Imagine How the Auto Industry Feels

• Magna International, one of the world’s largest automotive suppliers, can’t worry too much about election outcomes. The company operates in 28 countries, and 19 of them are having major elections this year.

• “Rather than look at presidential candidates and the message, we try to look at some key things that we believe are going to impact us, like what will happen to USMCA or NAFTA,” Magna CEO Swamy Kotagiri tells journalists.

• “The bigger question is… infrastructure, consumer sentiment, and their willingness to get past… range anxiety,” and whether tax credits will help offset what consumers pay for EVs, Kotagiri says. “Those are the things I think are more important.”

We’re electing a new US president in 11 days, and anyone paying attention knows the stakes are monumental. If you’re tied directly to the auto industry, you may look beyond the hot-button issues of immigration and abortion to each presidential candidate’s agenda when it comes to the economy, labor, and the environment.

What can automakers and the thousands of component suppliers do to navigate these treacherous waters, besides trying to avoid any political dust-ups that might make your company a target for politicians eager to score points with voters or commentators?

Magna International, one of the world’s largest automotive suppliers based in Ontario, Canada, has learned how to motor on, despite rapidly shifting political winds. The company operates in 28 countries, and 19 of them are having major elections this year.

But this year’s US presidential election is bound to impact the auto industry because each candidate has widely opposing views on climate change, sustainability, battery-electric cars, and the vital (but currently lagging) infrastructure necessary to support them.

“Rather than look at presidential candidates and the message, we try to look at some key things that we believe are going to impact us, like what will happen to USMCA or NAFTA,” Magna CEO Swamy Kotagiri tells journalists gathered in Troy, Michigan, at a recent technology showcase for the company.

And the impact extends well beyond the regional US Mexico Canada Agreement, which replaced 1994’s NAFTA trade pact.

“What happens to the Paris Agreement?” Kotagiri asks. Republican nominee Donald Trump has said he would withdraw US participation from the global climate treaty if elected.

“What’s the viewpoint on 2035?” he asks in regard to the date by which many cities, states, and the European Union want to ban the sale of vehicles with internal-combustion engines.

That’s about the best that Kotagiri can do—raise tough questions that no one can definitively answer.

How about tariffs, which both candidates want to place on Chinese EVs to keep them from the US market?

“If there are tariffs for entry in the US or North America in a very high level, it means lesser EV penetration for the time being,” Kotagiri says, while recognizing that tariffs could provide Western OEMs a chance to pursue new technologies and achieve economies of scale without the threat of low-priced EVs undercutting the market.

Current weaker demand for EVs in the US, Kotagiri says, suggests ICE vehicle sales will see “an uptick” in deliveries, which will help automakers and long-standing component suppliers to achieve the necessary returns on existing capital for manufacturing.

While automotive prognosticators expected 40% (or more) of US vehicle sales to be all-electric by 2030, Magna was less optimistic several years ago, suggesting the share would be in the low 30% range. (Meanwhile, EV sales already comprise about 50% of the new car market in China, pushed along by the government. EV sales share reached 8.9% in the third quarter, up from 7.8% in Q3 2023, according to Cox Automotive.)

“I think we were criticized for being overly conservative at that time,” says Kotagiri, whose company supplies a long list of components for EVs and ICE vehicles while also being uniquely positioned as a contract assembler hired to build vehicles such as the Toyota Supra, Mercedes-Benz G-Wagen, and (until recently) the Fisker Ocean EV at its plant in Graz, Austria.

“As we stand today, I think we are deemed as a little bit more realistic, right?”

The past six months have been a rollercoaster for any company banking on viability in the EV market, especially in the US.

“Let’s say there’s been a significant pullback, deployment changes, portfolio optimization by customers, and so on,” Kotagiri says.

Magna has scaled back its capital spending and engineering investments directed specifically at EVs for the short term, while still expecting the all-electric market to grow considerably long-term.

Which brings us back to the election. The transition to EVs is complicated enough for those companies living through it, but what if one candidate wants to “drill, baby, drill,” for more petroleum while the other wants more EVs and more EV charging stations, especially ones that work?

“Election is a four-year cycle, and what we are going to produce this year has been decided four years ago, and what’s going to be produced three years from now is already decided,” Kotagiri says.

“So I tend to think that this is more secular, if you just take all the message on rhetoric out. The bigger question is… infrastructure, consumer sentiment, and their willingness to get past… range anxiety,” and whether tax credits will help offset what consumers pay for EVs.

“Those are the things I think are more important,” he says.

Do you think the political climate is partially to blame for slowing EV sales or the current state of the charging infrastructure? Please comment below.