- The Biden Administration is pouring $15.5 billion into the coffers of U.S. EV and battery manufacturers despite auto dealer lots overflowing with electric vehicles.
- EV manufacturing requires 40 percent fewer employees than gasoline car production.
- The UAW, representing autoworkers, is readying for a strike against manufacturers for higher wages and other considerations as inflation eats away at paychecks.
- China is aggressively marketing its electric vehicles in Europe which are cheaper and benefit from China’s world domination of the EV supply chain.
Last week, Energy Secretary Jennifer Granholm announced that the Biden administration is offering $12 billion of tax dollars to auto companies that agree to convert their factories into plants for hybrid and electric vehicles. The pressure on auto makers is so great from Biden’s new car efficiency and tailpipe emissions proposals that new car dealer lots contain hundreds of electric vehicles for sale, but few traditional gasoline cars, as the supply of electric vehicles is significantly outstripping sales this summer. The dealers are selling electric vehicles despite auto buyers saying they do not want them as the 92-day inventory shows.
Of the $12 billion, $10 billion will come from the Energy Department’s Loan Program Office and $2 billion will come from Inflation Reduction Act grants. The loan program was bolstered by the climate, tax and health care bill, passed solely by Democrats. The Energy Department will also make an additional $3.5 billion available for domestic battery manufacturing funded by the Bipartisan Infrastructure Law. According to the Energy department, both sets of funding will prioritize good working conditions, including facilities that pay high wages and commit to retaining or expanding collective bargaining agreements, despite there being no specific requirements to receive the funding.
The Biden administration was careful to include union agreement in the announcement as a strike may be pending with the United Auto Workers (UAW) union in mid-September. Labor concerns are heating up in the transition to electric vehicles with the union accusing industry of using the transition to cut wages and pushing the Biden administration to do more about it. Members of the union overwhelmingly granted union leaders authorization to call strikes during contract negotiations if new contracts fail to materialize by September 14—the date that the current 4-year contract expires. A Big Three strike would be the biggest auto strike since 2019, when more than 48,000 UAW workers at General Motors set up picket lines. The UAW has warned that a too rapid transition from internal combustion engine (ICE) to electric vehicles could put thousands of jobs at risk in states such as Michigan, Ohio, Illinois and Indiana. Ford’s CEO has pointed out that electric vehicles require 40 percent fewer workers to assemble.
Proposed Regulations
A proposed rule from the Environmental Protection Agency (EPA) projects that two-thirds of new vehicle sales could be electric by 2032 by requiring automakers to limit the greenhouse gas emissions coming from their tailpipes. To reach the limits, auto makers would need to either manufacture more electric vehicles or upgrade the gasoline-powered engines in their cars. The proposed rule affects model years 2027 through 2032. EPA’s rule was followed by a Department of Transportation (DOT) proposed rule that would increase the efficiency that auto makers must reach in their new car sales or be fined. The DOT rule results in the same share for electric vehicles sold in 2032 as the EPA rule, making it clear that government agencies are dancing to the tune of President Biden’s edicts on climate.
The Global EV Overproduction Problem
Over the past few years, the electric vehicle sector has been growing rapidly, exceeding growth estimates. For example, two years ago, the International Energy Agency (IEA) projected that the EV industry would reach between 7 and 12 percent of global auto sales by 2030, but the industry crossed that milestone last year with one out of ten vehicles sold being electric. About 7.8 million electric vehicles were sold globally in 2022, a 68 percent increase from 2021. The IEA now predicts that one in three new vehicles sold in 2030 will be electric. In 2018, Edison Electric Institute (EEI) projected that the number of electric vehicles on U.S. roads will hit 18.7 million in 2030; but has revised that number up to 26.4 million.
A recent report by Cox Automotive, “The 2023 Path to EV Adoption: Consumer and Dealer Perspectives,” found that the share of consumers considering buying an electric vehicle is at 51 percent of consumers now considering buying either a new or used vehicle, up from 38 percent in 2021. Cox Automotive has forecast that 1 million new electric vehicles will be sold in the United States in the current year, a record and more than twice the volume sold in 2021.
Despite this, EV supply is outstripping demand by a significant margin. The nation’s fully-electric inventory is reportedly up by almost 350 percent this year, with nationwide inventory sitting at over 92,000 vehicles at dealer lots as price and charging availability keep buyers away. That translates to a 92-day supply of electric vehicles, which is almost twice the current average for gasoline cars. The industry average is a 70-day supply during “normal times,” but ICE-equipped vehicles currently sit at a 54-day supply and hybrids are at 44 days. Plug-in and traditional hybrids from Toyota are making the best of 2023, with current supply for the Prius and RAV4 sitting at under 30 days each, which reaffirms Toyota’s argument that car buyers need a “stepping stone” from ICE to EVs. Hybrids combine internal combustion engines with batteries and allow buyers to use either system to suit their needs.
Competition Mounts
Despite the high inventory numbers, according to Cox Automobile’s estimates, no less than 33 new electric vehicles will be launched in 2023 alone, and more than 50 additional new or updated electric vehicles will be launched in 2024.
General Motors, for example, delivered 39,096 all-electric vehicles in the United States in 2022, up 57 percent year-over-year, but electric vehicles accounted for just 1.7 percent of GM’s total volume sold. (Tesla sold 1.3 million EVs.) GM plans to produce about 400,000 electric vehicles from 2022 through the first half of 2024, and expects to be capable of annual EV production of more than one million in North America in 2025. A 2022 “Car Wars” report forecasts that GM and Ford each will have roughly 15 percent EV market share in 2025 with new products like the F-150 Lightning and Silverado EV electric pickups driving the growth. Tesla’s share is expected to plummet from 70 percent to 11 percent.
To power its EV explosion, GM is pursuing its Ultium battery technology; a flexible battery that offers greater energy density, lower projected costs and increased range. GM is also investing $650 million in a mining company, Lithium America, to develop a Nevada mine extracting lithium, a critical battery component, with production expected to kick off in 2026, as long as environmentalists and the Biden administration do not delay it further. Lithium Americas split its company in November 2022 to remove a Chinese company, Gangfeng, from operations at the mine–the company’s largest shareholder. GM’s investment will be used to develop the Thacker Pass project in Nevada, the largest known lithium resource in the United States.
GM’s new battery plant in Ohio began production in August 2022 while a second battery plant is slated to open in Tennessee. GM has already started selling some high-end electric vehicles using battery packs made in its Ohio factory and expects its EV sales to increase sharply as it adds more affordable models such as the electric Chevrolet Equinox, electric Chevrolet Silverado pickup truck and Blazer sport utility vehicles. Overall, GM plans to have nine EV models available in the United States by the end of the year compared to four car models by Tesla.
But, Ford, GM and Tesla need to be aware of China’s entrance in the global EV market. Chinese EV manufacturers are making major inroads in Europe, leading the race for electric vehicles, as it debuts a number of models at the I.A.A. Mobility car show in Munich, Germany. On the first day of the event, BYD, the Chinese electric car and battery maker, unveiled two new vehicles and Xpeng – another Chinese EV maker — said it would start selling its cars in Germany next year, branching beyond Norway, Denmark, the Netherlands and Sweden where they currently sell. Also, Leapmotor announced it would bring its SUV to Europe in 2024. Chinese brands accounted for 8 percent of new electric vehicles sold in Europe in 2022, doubling from 4 percent in 2021, due to lower labor costs and local battery suppliers. CATL, the Chinese battery manufacturer, accounts for about a third of the batteries in all electric vehicles sold worldwide. Some analysts believe Western car manufacturers could lose a fifth of their global market share by the end of the decade.
Conclusion
The EV market is heating up with more manufacturers joining in, and providing competition to Tesla. To exploit the U.S. manufacturing market further, the Biden administration is providing over $15 billion in loans and grants to auto manufacturers and battery makers using U.S. tax dollars. That is happening as dealer lots are over flowing with electric vehicles that are not selling mostly due to price and charging availability. In America, it used to be that the customer was always right, but the Biden administration is using its power to change that to the government is right, and it is using taxpayer dollars and onerous regulations to make it come true. U.S. auto companies may be in trouble with their EV push, as China is entering the market with cheaper electric vehicles due to low labor costs and market dominance in battery technology.
