Originally posted on EVANNEX.
By Charles Morris
The Biden administration has proposed a number of initiatives to promote transportation electrification and clean energy. Three of them specifically target the auto industry: a restart of federal tax credits for purchases of electric vehicles; a major investment in EV charging infrastructure; and a new set of fuel economy standards. Which of these three programs is most important, which are the most likely to be implemented, and what are the effects of each likely to be particularly for Tesla drivers?
Tesla + sunny day = CHILL🌴 pic.twitter.com/9YUCsxeLtJ
– Tesla Greater China (@teslacn) September 28, 2021
Before going any further, note that it is always risky to make predictions about government programs. They are always extremely complex, they usually undergo major revisions between the proposal and policy stages, and their real effects usually show up over years or even decades. The pontification and expertise that follow is based on our better understanding of these proposals as they stand today.
Federal Tax Credits for Electric Vehicles 2.0
President Biden’s Build Back Better plan includes an overhaul of the federal tax credit system for electric vehicle purchases. The proposed system improves on the existing tax credit in several ways: it would apparently replace the tax credit (which only benefits high-income taxpayers) with a cash rebate; it includes an incentive for buyers of used electric vehicles; and it removes the carmaker-specific cap that ended credits for Tesla and GM, perversely punishing them for pioneering electrification.
However, there is one provision of the proposal that is not popular with Tesla fans – an additional sweetener for vehicles assembled by unions. Right now, the only automakers that would qualify for the additional credit would be Ford, GM, and Stellantis – all US factories of other automakers are non-union workshops. Tesla CEO Elon Musk, as usual, used provocative language to oppose credit, allying himself with accomplices from oil companies such as Joe Manchin (D-Fossil Fuel Industry), who probably don’t want no federal support. for electric vehicles at all.
Some believe that while supporting unions can be a laudable goal, it has nothing to do with promoting electric vehicles. Others argue that it has everything to do with union membership in electrification. A counterproductive “VE for employment” discourse is taking shape (encouraged by the oil industry) not only in the United States, but also in Germany and Japan, which are more favorable to the unions. The anti-Tesla FUDsters have found a new theme – portraying electric vehicles as job killers – so while union bashing may be politically popular in places like Texas, it’s probably not in the world. long-term interest of the electric vehicle industry.
Despite Mr Musk’s outrage, whether the UAW gets a bone thrown or not is arguably not a problem for Tesla. It’s hard to see how the amount of the rebate would matter much to a company that currently sells every car it can build and steadily raises prices, with no rollbacks. And Tesla buyers are not. not what you might call price sensitive. For those who can afford to invest $ 45,000 and more in a new car, another $ 4,500 is unlikely in any way to affect their buying decision (although, unfortunately , this could lead them to abandon a high-end wheel set or a working red paint). No one who’s tested a Tesla is likely to go for a Bolt just because it’s a few thousand cheaper.
Moreover, the whole debate, as controversial and entertaining as it has been, is probably moot. As of this writing, Build Back Better is dead in the water, shot down just before Christmas by Ebenezer Manchin. A reset EV tax credit can still be passed in one form or another, but it will almost certainly be less generous than originally intended.
Billions for a new charging infrastructure
The Biden administration’s action plan for electric vehicle charging is part of the bipartisan infrastructure law, which was enacted in November, so it’s a done deal (hopefully). However, it’s not quite the game changer we’ve read in some of the gullible media.
The bill establishes two separate programs and two separate bribes. The Charging and Refueling Infrastructure Grants Program will provide $ 2.5 billion in competitive grants, which can be invested in public charging of electric vehicles or at hydrogen, propane or natural gas refueling stations. Much of that money could end up being spent on projects that are not directly related to electric vehicle charging, and some amount will likely end up in the oil industry’s coffers.
The National Electric Vehicle Formula Program will provide $ 5 billion in “funding formula” that states can use “to build a national charging network.” The wild card here is the degree of discretion that state governments will have in how the funds are used. Lawmakers in less EV-friendly states will surely find ways to channel some of the loot towards pet projects, or use federal money to justify cutting state spending on existing initiatives. in terms of electric vehicles. The good news is that support for electric vehicles is not clearly divided along partisan lines, at least at the state level. Some Red States have invested in public charging in the past.
Inside the White House, push for funding for electric vehicle charging infrastructure (YouTube: News from KRIS 6)
Could some of this money be used to finance Tesla Superchargers? It is not inconceivable if Tesla continues to make Superchargers accessible to electric vehicles from other automakers in the US market. In the past, Tesla has co-located Superchargers with other chargers in publicly funded projects.
Make no mistake, $ 7.5 billion is a huge sum of money – but, spread across 50 states, that won’t allow the federal government to corner the charging market (and that is. probably a good thing). For comparison, consider other large-scale infrastructure initiatives. Electrify America was created in 2016 with a budget of $ 2 billion to invest over 10 years. Last November, the European charging network IONITY announced that it would invest an additional 700 million euros (approximately $ 792 million) to expand its network. Over the past few years, state governments and electric utilities have announced numerous charging initiatives costing hundreds of millions. The Edison Electric Institute, a utility trade group, recently announced that its members have collectively invested $ 3 billion in various electromobility-related projects. Volvo, Daimler and the Traton group have just announced a new joint venture that will invest 500 million euros to build a high-power public charging network for heavy goods vehicles and coaches in Europe.
Fuel economy standards for the future
In December, the EPA finalized a set of new automotive emissions standards, which the New York Times calls “the most significant climate action taken to date by the Biden administration, and [the] highest level ever for fuel economy.
The new rules, which apply to model years 2023 through 2026, will require automakers to produce passenger cars and light trucks with an average fuel economy of 55 mpg by 2026. Today’s average figure is 38 mpg. The regulations the Obama administration enacted in 2012 (and which the Trump administration tried to water down) would have imposed an average of around 51 mpg by 2025.
Of the three major EV initiatives we are discussing here, this is by far the most important. Unlike the other two, it requires action. Providing a discount on EVs and making charging stations available would help, but if consumers don’t have a good selection of affordable EVs to buy, they won’t take advantage of the discounts or chargers. Incentives on the demand side need to be matched with incentives on the supply side, and this is where fuel economy standards come in.
Strict fuel economy standards are designed to force automakers to produce electric vehicles whether they like it or not. No gasoline vehicle achieves, or ever will, anything approaching 55 mpg. (the most efficient [non-hybrid] gas burner in the U.S. market, the Mitsubishi Mirage, gets 39 mpg, and the Ford F-150 gets about 20.) This means that in order to meet the standards, automakers will have to sell a substantial number of electric vehicles to make up for it. their the big consumers of gasoline (and / or buy emission credits from Tesla).
Unlike rebates and investing in infrastructure, EPA standards take effect immediately. Automakers have already designed the cars they will sell for the 2023 model year, and their lines for 2024 and beyond, which will need to include more electric and / or hybrid vehicles, are on the drawing boards. None of this comes as a surprise to the men (and a woman) in the local offices – they have known since November 2020 that stricter EPA regulations were underway, and the recent wave of new investment in vehicle development. electrical, battery factories and sources of raw materials is certainly a direct result.
Unlike rebates and infrastructure investments, EPA rules will be hard to override for anti-VE forces. Unless an unforeseen miracle happens, Republicans will take the house back and possibly increase their de facto Senate majority in November and overthrowing President Biden’s climate initiatives will be one of their top priorities. However, as Trump’s wrecking team learned, rewriting federal regulations is a long and complex process – they had four years to do it, but time was running out. Even if a future Republican president were to take drastic action, like abolishing the EPA entirely (or asking the Supreme Court to remove its authority), by 2024 automakers will be on track to meet the new standards and hopefully, will have little stomach for turning the process upside down yet again.
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