The real-world results of tariffs are starting to show. In this case, Automotive Energy Supply Corp (AESC) built a factory to supply BMW with EV batteries. According to the Wall Street Journal, AESC “would face a substantial tariff bill if it were to import the necessary machinery from China” to finish the factory and start production. On top of that, the separate tariffs on steel and aluminum could become cost-prohibitive, further hurting the company. According to a memo to employees seen by the WSJ, work has paused due to “economic uncertainty arising from current federal policy and tax issues.”
Uncertainty Is The Enemy Of Business
The factory is under construction in Florence, South Carolina, and was slated to build next-generation battery cells for BMW starting next year. That commitment was made while Joe Biden was still President and his administration was using huge subsidies to attract battery manufacturers to the United States. Whether the 2026 timeframe can still be met is uncertain, though AESC’s chief executive for the US and Europe, Knudt Flor appeared optimistic speaking to the WSJ.
“AESC has invested over $1 billion into the Florence, South Carolina facility, and we anticipate being able to resume construction once circumstances stabilize. AESC fully intends to meet our commitments to invest $1.6 billion and create 1,600 jobs in the coming years.”
-Knudt Flor, AESC chief executive for US and Europe, per the WSJ
Now, the Trump administration is seeking to end subsidies for EV battery production early and make them completely unavailable to companies linked to China. AESC is based in Japan, but it is owned by the Chinese majority-owned Envision Group. On top of that, the Trump administration is working to remove the federal tax credit for EV purchases, which would likely reduce the demand for batteries. That could further hurt BMW’s plan to use the US-made batteries in the upcoming iX3 SUV and i3 sedan, which utilize the Neue Klasse platform.
More Companies Will Likely Wait Trump Out
With so much up in the air in terms of taxes and regulations, it’s likely more companies will pause plans to do business with or in the US. The modern supply chain is very much a global affair, and automakers are shuffling things around to try and make the best of the situation. The current administration will be in place for a four-year term, but global automakers will be in business long after that. When it comes to committing on long-term investments, pausing a year or so to see how things shake out could be the smart move.
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Meanwhile, we’re watching for more news on Ford’s $5.6 million BlueOval City complex in Tennessee, dedicated to battery production and EVs. Ford’s complex is supposed to be producing batteries later this year, but it will most likely need materials from China to make that happen.
What About BMW’s New EVs In America?
It’s unclear yet how, or if, BMW will proceed with its plan to bring the iX3 SUV (built in Hungary) and i3 sedan (built in Germany) to the US. As it stands, we would speculate that it will be too expensive, and the cars won’t have batteries waiting for them when they get here. If the US continues down the path of protectionism for the oil industry, the US will lose ground in the expanding EV sector. BMW has other markets, but if the US is cost-restricted with EVs then automakers like Rivian and startups like Slate may as well fold up shop and go elsewhere before they’re forced into failure.
Source: Wall Street Journal
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