How the US set the scene for electric cars to flourish in 2023

The US could soon lead the EV push, but barriers remain, and success depends largely on political will and battery recycling, argues Aidan McClean

America has been slow to adopt and provide for electric vehicles (EVs) compared to Europe. This does not come as a surprise considering that the US has had a long-standing love affair with large capacity internal combustion engines, a plentiful supply of oil to fuel them, and a powerful lobbying industry to fight on their behalf in Congress and the White House.

Automotive World Magazine - April 2023

However, in 2023, thanks to Biden’s major policy wins, the foundation has been set for serious progress to be made in preparing for EVs. This is mainly thanks to two policies; the Inflation Reduction Act (IRA), which is one of the largest policy packages ever passed and certainly the biggest boost to America’s climate action, and 2022’s Bipartisan Infrastructure Law (BIL). Additionally, states themselves as well as legacy car manufacturers are also taking action to improve their EV charging infrastructure and to promote EV adoption by consumers and businesses alike.

Together, these four factors mean that the US is set to make a big leap in both the responsible production and use of electric cars and chargers. However, three barriers remain.

The Bipartisan Infrastructure Law allocates US$7.5bn for charging infrastructure

Firstly, there are many attempts by fossil fuel industry lobbyists and regressive politicians to drag the climate crisis into the political by painting corporate responsibility and climate action as ‘woke’, and by arguing that the typical US consumer should not have to pay for tax incentives or charging stations that benefit EV drivers. For example, Wyoming is set to ban the sale of EVs by 2035 to preserve their oil and gas industries, and due to concerns around lack of infrastructure and critical minerals.

Secondly, America must rapidly start to source EV components and batteries in the US or from countries that have a free trade agreement (FTA) with the US.This is essential if consumers and manufacturers want to qualify for the IRA’s incentives. Yet, it remains an incredibly difficult task considering China’s dominance of battery and component manufacturing, and the current state of supply chains for essential minerals such as cobalt and lithium. These are mainly mined in poor conditions in sub-Saharan Africa, with much of the world’s supply outside of America’s FTAs.

One key to tackling this, as well as the third barrier to America’s widespread uptake of EVs, is domestic EV battery recycling—which must be significantly ramped up. The advantages of this are obvious; it reduces supply chains’ impact on the climate, makes EVs cheaper for consumers, and ensures a domestic supply of critical elements. Battery recycling en-masse is more than possible, but it is not easy.

EV tax incentives

The Inflation Reduction Act is a massive bill with a raft of implications for healthcare, infrastructure, environmental policy, and more. Most important, in the context of improving EV infrastructure, is Section 30D—the Clean Vehicle Credit. This will mean that, beginning in 2023, EV manufacturers will no longer face the 200,000-unit-per-manufacturer cap on Government-backed tax break incentives.

There are many attempts by fossil fuel industry lobbyists and regressive politicians to drag the climate crisis into the political by painting corporate responsibility and climate action as ‘woke’

All new vehicles will be eligible for a tax credit of up to US$7,500 delivered at the point of sale—half of which is eligible if the car meets the critical mineral sourcing requirements, and the other half for the battery component sourcing requirements.

However, from 2023, 40% of an EV battery’s minerals must be produced in the US or by a FTA partner, and 50% of the components will need to come from the US. This requirement will increase to 80% for minerals and 100% for components,  in 2027 and 2029 respectively. Taken together, all of these measures will supercharge both the uptake of electric cars and their domestic production. However, some critics argue that the economic protectionism may impact how many cars qualify for incentives, and ultimately, the subsequent uptake and positive climate impact.

Electric charging infrastructure

In early September 2022, all 50 US states were approved for an initial US$1.5bn in federal funding to provide EV charging infrastructure for 75,000 miles of highway. In total, the BIL allocates a total of US$7.5bn for charging infrastructure, including US$5bn for states to deploy charging stations and a US$2.5bn competitive grant programme for specific community programmes.

Tesla currently leads the US EV market

The IRA also provides its own boost to charging infrastructure, with an EV charging station credit, formerly known as the ‘alternative fuel refuelling station credit’, to help drivers and businesses cover the cost of charging stations. For individual/residential uses, the tax credit covers 30% (up to US$1,000 per unit) of the cost of the equipment. For commercial uses, the tax credit covers 6% (up to US$100,000 per unit) of the cost of the equipment.

Non-federal action

It is not just the White House and the federal government that is providing the foundation to the electric revolution; many states are themselves preparing for a rapid acceleration in EV adoption. For example, only last month, California approved US$2.2bn of investment to double the number of electric chargers in the state.

An essential component to a successful rollout of EV infrastructure is that private companies follow federal and local action with their own investment. Tesla has long had a global network of electric chargers, but legacy manufacturers are now getting involved too. Most recently, for example, General Motors confirmed plans to install up to 40,000 electric vehicle chargers across rural America.

The stage is set for the electric revolution

The US has some way to go before it catches up to Europe. However, thanks to a series of far-reaching, bipartisan-supported policies at the federal and state level, which have subsequently given private capital and legacy car manufacturers the confidence to invest in the electric revolution, the US will soon overtake Europe in charging infrastructure and uptake of electric cars.

About the author: Aidan McClean is Co-Founder and Chief Executive of UFODRIVE

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