Biden Plans an Electric Vehicle Revolution. Now, the Hard Part.8 min read
WASHINGTON — Aggressive rules proposed by the Biden administration to drastically speed up the country’s transition to electric vehicles, and significantly cut the auto pollution that is dangerously heating the planet, face several economic, logistical and legal challenges.
The plans, outlined Wednesday by the Environmental Protection Agency, are designed to ensure that two-thirds of new passenger cars and a quarter of new heavy trucks sold in the United States are all-electric by 2032. If enacted as proposed, the regulations would mean a quantum leap for the auto industry in the United States, where just 5.8 percent of new cars and less than 2 percent of trucks sold last year were all-electric.
Transportation is the single largest source of greenhouse gases generated by the United States, the second-biggest polluting country after China. To head off climate catastrophe, President Biden has promised to cut the nation’s emissions in half by 2030. Shrinking tailpipe emissions is key to that plan.
But to transform the American automobile industry on the scale it envisions, the Biden administration has to surmount resistance from manufacturers and consumers as well as likely legal challenges from those who consider the regulations government overreach.
One of the most important aspects of a wholesale transition to electric vehicles has to do with timing.
Although nearly every automaker has already invested billions in electrification, the proposed regulations create a dilemma: how to continue to manufacture gasoline-powered vehicles, which provide profits, while investing even more in new electric facilities. The aggressive timeline envisioned by the government means the carmakers could also struggle to source the materials required for vehicle batteries, already difficult to obtain.
Market demand is another challenge. Even with federal tax incentives of up to $7,500 for consumers, electric vehicles cost more upfront than conventional cars and trucks. At the end of 2022, the price of an average new car was $49,507 compared with $61,448 for an electric vehicle, according to the Kelley Blue Book. But even for motivated consumers who can afford electric vehicles, a major stumbling block is what’s known as range anxiety, the fear of being stranded because an electric vehicle cannot reach its destination on a single charge and not enough fast-charging stations exit.
“This was always a transformation that was going to happen over decades,” said Stephanie Brinley, an automotive analyst at S&P Global. “Putting this aggressive a timeline on it means that there are a lot of things that have to happen consecutively and concurrently.”
Looming over all of this is an all-but-certain legal and political threat: The new rules could be erased by the courts or a future president.
In many ways, the industry is already moving into an all-electric future. General Motors has set a goal of phasing out the sale of all internal combustion vehicles by 2035. Ford Motor has said it hopes E.V.s make up half of its sales by 2030. Volkswagen and Stellantis, the company formed through the merger of Fiat Chrysler and Peugeot, have similar targets. Hyundai and Nissan are also ramping up E.V. production.
But the proposed regulations would require even more of automakers.
Ford is on track to spend $50 billion between 2022 through 2026 on its electric vehicle production, with two battery factories under construction in Kentucky, and a third planned in Tennessee, along with an electric truck plant. In February it announced it would build a $3.5 billion battery plant in Michigan with a Chinese partner.
The automaker, however, will most likely need to spend billions more if electric vehicles are to make up two-thirds of the more than two million vehicles that it sells in North America annually.
The risks of accelerating the transition away from gasoline-powered vehicles are “high, if not very high,” for the industry, said Matthias Heck, a vice president at Moody’s Investors Service, “because electrification will require further substantial investments into new battery electric vehicles, battery technology, supply chain and manufacturing capacity, and charging infrastructure.”
Ford and other automakers also have not yet secured sufficient sources of lithium, nickel, cobalt, manganese and other materials needed for automotive batteries, and it is unclear where they will get them.
While the Biden administration is betting that electric vehicle costs will come down with mass production, Carlos Tavares, chief executive of Stellantis, said the difficulty of sourcing materials worked against that. “The affordability is not there because the raw materials are scarce and very expensive, and, I would add, very volatile,” Mr. Tavares said at a recent conference in Detroit.
Manufacturers are funding their electric vehicle production now from substantial profits on their gas-powered trucks and sport utility vehicles. But maintaining profitability as they produce more electric vehicles and fewer gas-powered models will be a challenge, experts say.
General Motors has said it is not yet making money on its electric vehicles, and Ford recently said its electric division was set to lose $3 billion this year. Both companies hope to turn the corner as they ramp up production of electric models but are also trying to cut costs now, especially in view of the uncertain economy.
G.M. is in the process of eliminating 5,000 jobs as part of an effort to reduce costs by $2 billion. Ford last year began to trim about 3,000 jobs from its work force.
“Getting to 50, 60 percent E.V.s is certainly possible,” said Sam Abuelsamid, a principal research analyst at Guidehouse Insights. “But this isn’t going to be easy. Not at all.”
And while the pace of electric vehicle purchases is ticking up, many car buyers are uncertain about the new technology.
“We’re making sales to early adopters and easy adopters but we need to get beyond them,” said John Bozzella, president of the Alliance for Automotive Innovation, which represents large U.S. and foreign automakers. “We have a long way to go."
The most basic hurdle is price.
The federal government will offer buyers up to $7,500 in tax credits for the purchase of an electric vehicle for the next decade, depending on how much of the vehicle was made in the United States. But of the 91 unique electric vehicle models now on the market in the country, fewer than 40 qualify for the tax credits, Mr. Bozzella said.
Drivers are also worried about charging electric vehicles. There are currently 130,000 public electric vehicle charging stations in the United States, according to the White House. Under the 2021 infrastructure law, the government will spend $7.5 billion to build half a million electric vehicle charging stations along federal highways. But a January report from S&P Global concluded that the nation would need more than 2 million public charging stations by 2030, in addition to private home and garage chargers.
Doug Freeman, an insurance executive in Amesbury, Mass., is an obvious customer for an electric vehicle. He has a 140-mile round trip commute to work, and currently drives a Chevrolet Volt hybrid. “For me, the green side isn’t number one on the priority list, but the savings on fuel from an electric vehicle would be a lot more than for the average consumer,” he said.
But the model he covets, the Kia EV6, is not made in the United States and doesn’t qualify for the $7,500 tax credit. “Without the credit, it’s $50,000 to $54,000,” Mr. Freeman said. “I’ve never paid more than about $33,000 for a car.”
Electric vehicle makers are making use of one way to win over consumers: rentals. In 2021, Hertz, the car rental company, bought 100,000 Teslas, making E.V.s 20 percent of its fleet. Most other major car rental companies are also adding electric vehicles to their fleets.
“Rental cars are an excellent way to move E.V.s from niche to mainstream,” said Drew Kodjak, executive director of the International Council on Clean Transportation, a research organization. “It offers consumers a way to test-drive electric vehicles for a few days, see if they like them, see how they feel about range anxiety,” he said.
By purchasing American-made electric vehicles such as Teslas, the rental companies receive $7,500 in tax credits per car. And the Biden administration has made it easier for the rental companies to resell the cars after a few years: buyers can receive up to $4,000 in tax credits for the used electric cars.
“Through the incentives and the new laws, the administration has put in place a lot of policies to help automakers get where this regulation says they need to go,” Ms. Brinley of S&P Global said.
Even if companies can churn out affordable electric vehicles at a fast pace, and consumers get over range anxiety, the proposed regulations are certain to be hit with legal challenges or be subject to shifting politics.
Mike Sommers, president of the American Petroleum Institute, which represents the oil and gas industry, called the regulations “a major step toward a ban on the vehicles Americans rely on.”
“As proposed, this rule will hurt consumers with higher costs and greater reliance on unstable foreign supply chains,” Mr. Sommers said.
Former President Donald J. Trump relished rolling back the auto pollution regulations enacted by his predecessor, Barack Obama. A future president could do the same to the Biden regulations.
A group of Republican attorneys general, many of them from oil-producing states, has already challenged several of the Biden administration’s climate polices, none of which are as ambitious as the proposed auto pollution regulations.
Attorney General Patrick Morrisey of West Virginia suggested on Wednesday that the group would fight the newest proposals.
Steven G. Bradbury, who served as the chief legal counsel for the Transportation Department during the Trump administration, said the regulations would amount to government overreach.
“They are using this established, longstanding statute for an entirely new purpose, to force an entirely new goal: the transformation of the industry to electric vehicles,” said Mr. Bradbury, a former clerk for Justice Clarence Thomas. “This is clearly driven by the president’s directive to achieve these results. I don’t think you can do this. Congress never contemplated the sues of statutes in this way.”
Jody Freeman, a professor of environmental law at Harvard University, who also served as a climate adviser to President Barack Obama, argued that the Clean Air Act has been used successfully for years to compel polluting industries to invest in new technologies to reduce emissions.
“All of that is part of the normal course of how E.P.A. has set standards,” she said.
But she conceded that it may not be seen that way by the current Supreme Court, consisting of six judges appointed by Republican presidents, including four named to the court by Mr. Trump.
“It is a court that is very unsympathetic to regulation of any kind, and particularly hostile to the E.P.A.,” Ms. Freeman said.
Source: Read Full Article