Key Takeaways
President Biden’s Energy Department announced potential grants of $1.7 billion to automakers willing to convert plants to make electric vehicles and/or their components in manufacturing states, which will likely be finalized after the November elections.
Biden’s industrial policy has pushed automakers to make more electric vehicles using both supply incentives and demand requirements, a “carrot and stick” approach designed to keep his promise to the U.N. in support of the Paris Accords on climate.
The grants are happening at a time when consumers are turning their backs on electric vehicles and they are piling up on dealers’ lots.
The Biden administration plans to award General Motors and Chrysler-parent Stellantis nearly $1.1 billion in grants to convert existing car manufacturing plants to build electric vehicles and components. The Department of Energy (DOE) announced $1.7 billion in planned grants to help fund the conversion of 11 “at risk” plants in eight states to enable the production of 1 million electric vehicles annually, help retain 15,000 existing jobs, and create 3,000 new positions. The plants are “at risk” because of EV transition policies being forced by Washington, D.C. The awards are for plants in Michigan, Ohio, Pennsylvania, Georgia, Illinois, Indiana, Maryland, and Virginia — some of which are swing states in the November presidential election.
To support the EV effort further, President Joe Biden has prodded U.S. automakers to assemble a rising number of electric vehicles, introduced new tax incentives and funded EV charging stations. Biden federal regulators have also issued stricter emissions rules to boost EV sales. Despite these initiatives designed to increase demand, Americans’ interest in purchasing electric vehicles isn’t matching the Biden administration’s desires as the rate of growth of EV sales has fallen due to the high cost of electric vehicles and lack of charging stations, of which the federal government has only installed seven out of the 500,000 it promised. As a result, electric vehicles are piling up on dealer’s lots.
The White House is courting union workers in key battleground states and seeking to reassure autoworkers that its policies pushing electric vehicles will not cost jobs, despite requiring fewer workers to manufacture them and maintain them than gasoline and diesel vehicles. The Energy Secretary told reporters the awards were a “hallmark of the Biden administration’s industrial strategy” and would “modernize historical auto manufacturing facilities.”
The Biden administration’s grants include more than $650 million for two factories in Michigan. The plants in Michigan include General Motors’ Lansing Grand River Assembly, which is to be refurbished at an unspecified future date to allow production of new EV models and could receive up to $500 million, if it, like the other projects, hits marks for retooling, production and hiring or employee retention. The plan calls for retaining more than 650 UAW jobs at the facility and adding 50 new hires. GM will make its own unspecified investment to produce electric vehicles in Lansing at a future date but said the plant will continue to produce the Cadillac CT4 and CT5.
ZF North America Inc. was also awarded a grant of up to about $158 million to retool a portion of its plant in Marysville in St. Clair County to move from making axle drive component parts for internal combustion engine vehicles to components for electric vehicles. The grant calls for retaining 536 jobs, including 387 UAW employees.
The potential grants also include $335 million to help reopen and convert Stellantis’ idled Fiat Chrysler assembly plant in Belvidere, Illinois, to building electric vehicles, restoring some 1,450 union jobs. Another $250 million will go to convert Stellantis’ transmission plant in Kokomo, Indiana, to make electric drive modules, which combine the motor, transmission and other electronics in a single unit in battery-powered electric vehicles. The grant expects to retain 585 UAW jobs. In October, Stellantis agreed to build a new $3.2 billion battery plant and invest $1.5 billion in a new mid-size truck factory in Belvidere, Illinois under a new union contract.
Other plants in Ohio, Pennsylvania, Georgia, Maryland and Virginia also received grants to help shore up supply chains and assembly of electric cars, trucks and buses. The funding was included in the Democrat-passed Inflation Reduction Act in 2022.
Hyundai Mobis, which operates a Stellantis supplier in Ohio, will receive $32 million to produce plug-in hybrid components and battery packs.
Other awards include $89 million for Harley-Davidson to expand its York, Pennsylvania plant for EV motorcycle manufacturing; $80 million for Blue Bird to convert a former Georgia plant to build electric school buses; and $75 million to engine company Cummins to convert part of an existing Indiana plant to make zero-emission components and electric powertrain systems. The DOE also plans $208 million for the Volvo Group to upgrade plants in Maryland, Virginia and Pennsylvania to increase EV production capacity.
The DOE must still complete negotiations with companies on milestones and other requirements and complete environmental reviews before the awards are finalized. Given the current time it takes DOE to complete negotiations for awards, there is little chance these awards will be finalized and the money will go to these companies until after the next Presidential inauguration.
Conclusion
The Biden administration is handing out grants and other incentives to increase EV production in order to reach Biden’s goal of a 50 percent EV share of auto sales by 2030—part of the plan to keep his promise to the U.N. in support of the Paris Climate Accord. Biden’s Department of Energy has proposed grants of $1.7 billion to companies that will either manufacture electric vehicles or their component parts. This situation of free wheeling with taxpayer dollars is reminiscent of Solyndra and Fisker—companies that the Obama administration funded that failed in that administration’s endeavor to transform the energy market. Rather than let markets work and consumers select the best technologies to meet their needs, the Biden administration is using regulations, grants, tax credits and other incentives to push manufacturers towards faster EV production and sales, despite the rate of growth in EV sales slowing.
Donald Trump has criticized Biden’s EV policies and vowed to reverse them if he takes office. Trump vowed to “terminate” green vehicle mandates, warning that if they continued under Biden, “American auto production will be totally dead.” Currently, the U.S. auto industry cannot compete against electric vehicles made by Chinese manufacturers, who are making the cheapest electric vehicles on the market and gaining market share in Europe. Only U.S. trade policy is keeping those manufacturers from flooding U.S. vehicle markets.
