Policy Uncertainty Threatens U.S. EV Supply Chain Expansion
AESC, controlled by China’s Envision Group, has paused construction on its $1.6 billion EV battery plant in Florence, South Carolina. The decision follows escalating uncertainty surrounding U.S. tariffs on Chinese-made equipment—potentially up to 145%—and a proposed rollback of federal EV subsidies for firms with Chinese ties. Despite investing $1 billion into land, site prep, and buildings, AESC suspended equipment installation while awaiting policy clarity.
The plant was expected to supply BMW’s Woodruff battery-assembly facility by 2027 and create 1,600 jobs. With $256 million in South Carolina incentives still available, the project remains frozen. This development exposes broader risk across the U.S. "Battery Belt," where federal trade and industrial policy inconsistencies are directly affecting capital deployment and global supply chain strategies.
Scenario Forecast
Base Case – Delayed but Proceeding (55%)
In this scenario, AESC cautiously resumes construction by mid‑2025 after the Trump administration provides clearer guidance on EV subsidies and trade policy. White House trade authorities under President Donald J. Trump issue a limited exemption, allowing equipment sourcing under tightened compliance measures despite partial Chinese ownership . While IRA credits are reinstated, AESC faces cost overruns due to higher tariffs on specific components. Machinery sourcing adjusts through non-Chinese vendors, slightly easing deployment. Operations launch in late 2026 or early 2027, with the full workforce of 1,600 positions eventually filled. South Carolina’s incentive package remains intact, though public praise is measured amid state-level debate. This outcome reflects a pragmatic shift in the administration's stance toward strategic clean‑tech growth.
Upside Case – Policy Stabilization and Acceleration (15%)
Here, the Trump administration initiates strong industrial policy signals by granting broad carve-outs in executive orders signed in mid‑2025. These carve-outs allow AESC to qualify for full IRA benefits under explicit conditions verifying U.S.-based operational control and cybersecurity safeguards . Simultaneously, the administration negotiates a limited trade deal with China that reduces tariffs on EV machinery while maintaining pressure on other sectors. As a result, AESC resumes full-speed equipment installation in Q1 2025, meets its 2026 launch goal, and may even exceed local hiring expectations—spurring additional private investment in ancillary services and further strengthening the Southeast Battery Belt.
Downside Case – Strategic Retrenchment and Capital Loss (30%)
In this outcome, Congress passes bipartisan legislation—as urged by hardline factions within President Trump’s coalition—explicitly barring firms with any Chinese ownership from IRA subsidies. At the same time, the administration enforces full 145% tariffs on machinery sourced from Chinese companies, with no carve-outs . Unable to proceed economically, AESC halts all U.S. construction by late 2025 and explores divestment or site abandonment. BMW, cut off from its intended battery supply, pivots to other suppliers at higher cost and longer lead times. South Carolina is left with idle infrastructure and $256 million in unredeemed incentives, while investor confidence in Chinese-linked EV investments under future Trump administrations deteriorates—slowing the national rollout of clean-tech facilities.
