Five Ways the US Election Could Affect the Auto Industry

The US election often gives a feeling of hope and replenishment in the country, but will this be the case for the auto industry?

The economic turmoil of 2020, which can point directly to the spread of COVID-19 as the cause, has taken its toll on every industry  Regardless of which party has control of Congress or the Presidency, there are expected effects to look for after the elections are over.

Post-Election Sales: Which Way Will They Go?

Buckle up automotive industry. Why? There is historical data going back to 1976 that shows diminished sales in autos after an election. This data shows that regardless of the party elected, incumbent status, or expected changes, sales of vehicles will drop during the first six months after the election. The question you might have is what a newly elected President has to do with auto sales in the country?

The effect of an election on our thinking about spending is significant. While we can see clear data that shows auto sales will slow for six months after the election, they can quickly rebound if economic stability or growth is experienced. Considering the environment we’re in now, it seems we’re going to see growth, no matter which party has control of the Oval Office.

Industry Regulation: More of Less?

You can expect a shift in regulations and policies related to the auto industry after the election. Whether that shift comes from a new Congress, a new President, or the current elected officials, you can expect something to change. We will either see more environmental regulations put in place or continued de-regulations of various aspects of the auto industry. While we all wait to see who the elected will be in many offices, it will be interesting to see how the elections affect regulations.

Will auto industry regulations include alternative fuel vehicles? Will we see growth in autonomous vehicle testing? Will Congress approve a new tax credit for buying hybrid and EV models? These are questions that are certainly important to consider along with the traditional regulation questions.

Governmental Relations: Which Automakers are Government-Friendly?

The likely effect of relationships with the government and automakers will be a positive one. While the COVID-19 pandemic has certainly taken its toll on many industries, automakers have predicted a decline after several years of record sales, which means they won’t likely need a bailout like they did in 2008. This could serve as a net-positive for the auto industry, regardless of which part is in control of the different branches of the government.

Both parties are likely to tell us they are friendly to the auto industry, and both will be telling the truth. There are so many ways that government officials can collaborate with automakers that it’s nearly impossible for them to be adversaries unless provoked.

International Tariffs and Treaties: Will This Continue to be a Trouble Spot?

Tariffs have a double impact on an economy and they are made to restrict free trade. US tariffs date back as far as 1789. Typically, a tariff will protect domestic jobs from foreign imports, but that protection comes at a higher price to consumers when these tariffs are imposed. Treaties can open the marketplace to free trade and more commerce. Unfortunately, more than $80 billion in new tariffs were imposed on thousands of products in 2020.

Even though we’ve experienced several tariff restrictions and fewer open treaties recently, most elections don’t result in an upsurge in this action right away. The likely effect of international tariffs and treaties will be little in the short-term, regardless of the party in control.

Foreign Exchange: How Will the US Dollar Stack Up?

From 1995 to 2019, the USD foreign-exchange values in November were the worst on average in presidential election years when compared to the Euro, the British Pound, the Australian Dollar, the Canadian Dollar, the Chinese Yuan, and the New Zealand Dollar. The difference can be significant and it can impact the auto industry around the globe.

While it’s nearly impossible to predict where the USD will stack up with the other global currencies, domestic automakers working in foreign markets have been through this before and understand the potential for currencies to fluctuate during an election year.

Summary: Not Much to Worry About

The immediate impact on the auto industry from the 2020 election will likely be minimal. Typically, elected officials work toward other areas of their agenda first and address the auto industry when something needs to be improved or corrected.