A good post by Capital King on the LTR thread:
Hi All,
I have pondered the question about how a Trump or Harris presidency would affect lithium stocks and to be honest the pathway forward looks good under both presidencies for different reasons.
There are a few distinct points that need to be considered separately:
- Traditional energy production as a utility to reduce inflation rather than opposition to clean renewables.
- EV Consumer Demand vs EV Mandates.
- EV arms race between America and China.
Traditional Energy Production:
It would be over-simplistic and a mistake to view Trump's preference for traditional energy production as anti-EV.
I view Trump's policies around production of US domestic traditional energy more as two-fold.
- Trump views traditional energy production primarily as a utility to reduce inflationary pressures in the US economy (which will help cool inflation here too) as expensive energy costs are passed onto the end consumers for all products. This has nothing to do with EVs other than if energy costs drop, it becomes both cheaper to fill up at the pump for ICE and to charge an EV at the wall.
- Secondly, a boost in US energy exports will help the US capitalise on additional revenue. Absolutely nothing to do with EVs.
I only state the above to clear misconceptions which I think would be easily and naturally concluded.
EV Consumer Demand VS EV Mandates:
Let it be
very clear, neither Trump nor Vance have anything against EVs at all. If they did, they wouldn't have tremendous support from Elon Musk.
Their view on the EV market is more driven by consumer choices (opposed to mandates) and wanting to compete globally in the exports market, which I'll cover in the next section.
When Vance had been asked about honouring the $500 million General Motors is receiving from a Biden policy to convert the Lansing Grand River Assembly plant from making internal combustion engine cars (ICE) to producing electric vehicles (EV), JD Vance said:
- The Democratic presidential nominee (Harris), is "offering table scraps" - I believe the Republican's might offer more.
- “So neither me nor President Trump has ever said that we want to take any money that’s going to Michigan auto workers out of the state of Michigan”
- “We certainly want to invest in Michigan auto workers as much as possible."
If you consider that EVs are the future and consumer demand is already increasing GLOBALLY, and the US want to tap into the global export markets too, its a no brainer that Trump will want to see America lead this through natural consumer demand. With Elon Musk to be leading the Department of Government Efficiencies, he is probably going to want to cut red tape to make the production of EVs in America on a much larger scale. This will also extend to the manufacturing of battery cells within America instead of China which is a Republican concern.
You also need to consider that if the US wants to compete in global exports of vehicles, they will need to produce more EVs as this is expectation in other economies such as the growing EU markets. The momentum behind EVs is simply too strong to stop. Globally, automakers and governments are committed to the transition to electric, with investments and policy incentives set years in advance. Major automakers have already shifted their production lines to EVs. Regardless of short-term policy changes, the market demand for EVs will continue to drive lithium demand forward.
Here is a short clip from Vance explaining that they are not against EVs.
The EV arms race between America and China:
As I have previously alluded to, Trump wants America to be at the forefront of vehicle manufacturing including EVs if that is where consumer demand is (which it is). Don't let rhetoric fool you, Trump, Vance, and Elon are well aware that the future is electric and will be doing everything they can to ensure America wins the EV arms race.
There is no way they will allow China to out compete the US in this regard... It's more likely that with the help of Elon, they will seek to produce more EVs than China if thats what it takes to compete globally and protect Detroit / Michigan.
We must also consider the need for maturation of the lithium and EV market. If Trump wants to "bring back manufacturing" to Detroit and Michigan by boosting production in the US, which is driven by consumer trends continually favouring EVs, this will be an important and crucial step in the lithium markets maturing and curbing China's dominance in this space. As much as China has contributed so far to EV production, the market needs increased competition from EV manufacturing in the US to loosen China's grip here. We have seen how China can manipulate the price of lithium if they remain the largest player in the production market.
Under Harris, I'm not sure if EV manufacturing would be the same in the US, it's more likely that American's would be driving more foreign (Chinese) imported EVs as opposed to American made EVs than compared to under Trump. Ultimately, the high consumer demand will set the course and it's clear that lithium demand will also continue to be high, and it's better that lithium is purchased by the US than by China where pricing is not transparent and prone to manipulation.
From a US nationalist perspective, Trump would prefer to source lithium from within the US, but as we know the global demand for lithium is projected to increase drastically and the US will need to continue to source from allied nations such as Australia. Not all lithium is equal, and our lithium will always be in demand. There is a good reason why Liontown Resource has chosen to partner with Ford and Tesla for lithium supply from the beginning.
It's not clear how it exactly plays out, but the overall trajectory is positive in my opinion. I think it's not a straight-forward topic and the markets will take time to realise this.
Kind regards,
CK
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