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16 December 2021

Biden Harris plan for EVs, deeply flawed, promotes slow adoption

This week the US Biden-Harris administration has put out an EV Charging Action Plan, but it continues to snub the market leaders, in particular  Tesla, and may well end up making the EV revolution in the US a damp squib, leaving the country behind in a critical industry.

The statement kept underlining that it was all about union jobs, and not about technology leadership, and given that Tesla is not unionized, because it already pays better than all union agreements – Joe Biden may have shot himself in the foot.

Most of this is contained in the Bipartisan Infrastructure Law and these are simply the details of how the Department of Energy (DOE) and Department of Transportation (DOT) will manage the process, tapping into the DOE national labs know how and dispensing funds.

The DOE and DOT will establish a Joint Office of Energy and Transportation focused on deploying EV infrastructure – but they say their first step is to collect input and guidance from industry leaders, manufacturers, workers, and other stakeholders. So presumably since Tesla is THE leader, it should get involved at this stage, although we suspect that it may not be invited.

And a nod to the poor says that the roll out strategy will focus on filling gaps in rural, disadvantaged, and hard-to-reach locations – that’s probably a mistake right there. Most countries are focusing on key routes, which carry most traffic – here the US seems to be saying it will do the opposite, but as we dig into the detail, this isn’t quite right. The key in most national plans seems to be to buy the most expensive “fast charging” charge points, which can charge a battery in 20 minutes and so process far more cars, rather than focus on cheaper slower points, which can only be used by a handful of people in poorer towns.

Still a network of 500,000 chargers can’t ALL be in the wrong place. In the end the individual States will decide where they apply to put these and the Infrastructure Law includes $5 billion in funding for States with a goal to build a national charging network.

Just 10% is set aside each year for the Secretary to provide grants to States to help fill gaps in the network.

The Law also provides $2.5 billion for communities and corridors through a competitive grant program and that’s where the Administration priorities will be targeted at rural regions, places with poor air quality and disadvantaged communities.

This is being done because every new technology which has been rolled out in the US from cable TV to broadband to mobile, has ended up with the poorest 5% of people being ignored and the government having to pick up the check for filling in the gaps. We understand that, but it’s the right way round. Cheaper EVs won’t be around for another 2 to 3 years, and this market will fill from the top down. It doesn’t make sense for Tesla owners to be forced over to the “wrong” side of town, to refill their cars, in a place where an EV may stand out like a sore thumb.

It’s also very important that this initiative ensures that all cars can plug into it, and no-one company (i.e. such as Tesla) is excluded by design. Now we realize that typically it is proprietary market leaders (like Apple and Tesla) which tend to try to differentiate their “connectors” so they cannot be used with other cars, but already this is beginning to be avoidable in this segment, as most have fall backs to other connectors now. A petrol pump that is too big for a particular car’s petrol tank, is no good to man or beast – but we don’t see this happening.

The White House plans to hold a series of stakeholder meetings and may well go down a specific route by which manufacturers it chooses to deal with and invite into its planned Advisory Committee. Failure to invite Tesla would be yet another mistake that this administration could avoid, but which we don’t believe it will.

Tesla CEO Elon Musk has been critical of the legislation that enables this, not just because it applies mostly to electric cars made in the US by a unionized workforce. But there are also other dissenting voices including Toyota, Volkswagen and BMW, which also do not support US unions.

Vocally Biden has praised GM and almost treated it as if it invented EVs, rather than being brought to them kicking and screaming by the likes of Telsa. GM CEO Mary Barra is sure to have a seat on the Advisory Committee, and so will Ford. Biden may feel he is leveling the playing field if he supports Ford, GM and Stellantis above Tesla, Lucid and Rivian, but it is the latter that made this transition happen. Perhaps he hopes that by giving the traditional suppliers an edge in his policy he can stop these “native” EV specialists surging too far ahead, particularly in stock market value. In our estimate it is too late for that. The Advisory committee will be in place by Q1 2022.

The DOT has a new EV Charging Request for Information, where all stakeholders can submit priorities for guidance on where the US already has EV charging and where it needs more of it.  By May 13th the DOT will publish standards for EV chargers in the national network to ensure they work, they’re safe, and they’re accessible to everyone.

As part of all this the DOT has announced a solicitation for a 6th round of Alternative Fuel Corridor designations. This program, created by the FAST Act in 2015, recognizes highway segments that have infrastructure plans to allow travel on alternative fuels, including electricity.

The current network of over 100,000 public chargers operates with different plug types, payment options, data availability, and hardware hookups. The idea is to merge all of this into a single uniform approach. But to do that someone is going to have to build a unified app and cloud management system which can be used by different brands in the market equally. The hope is that efforts like these can be from additional private sector investments and not require any of this cash.

The money from the bill will also be used to increase domestic manufacturing of EV batteries and components which are environmentally responsible and which support recycling.

The US Government has already carried out a review of supply chains for critical battery minerals, which made dozens of recommendations, which can now be enforced with this purchasing program. So expect lithium, cobalt and nickel mining to come with an open supply chain that can be easily inspected and verified, as part of the criteria for financial support. All of this is already laid out in the National Blueprint for Lithium Batteries.

The DOE Loan Programs Office has also published a fact sheet guiding anyone who wants to get their hands on any part of the $17 billion in loans in the Advanced Technology Vehicles Manufacturing Loan Program. Expect this money to go to traditional suppliers ahead of start-ups, and specialist Battery Electric Vehicle makers.

The DOE’s Federal Energy Management Program is a new effort to support energy storage projects by federal agencies, and the suggestion is that any funding it has could be channeled into helping Federal departments to build energy storage on-site to back up EV charging. Looks like being a Federal government employee is going to mean having plentiful charge points at work, with cheap electricity – solar plus battery, not grid.

The Biden Administration has already funded new sourcing of lithium from geothermal brines and approved a permit for the Nevada-based Thacker Pass lithium mine, as well as Ford sourcing lithium from recycled content through Redwood Materials, GM sourcing lithium from geothermal brines in the Salton Sea, and Tesla sourcing lithium from a Piedmont project in North Carolina.

There will be $3 billion in grants for battery minerals and refined materials aimed at accelerating the development of the North American battery supply chain and another $3 billion for competitive grants aimed at building, retooling, or expanding manufacturing of batteries and battery components (such as cathodes, anodes, and electrolytes), and to establish recycling facilities in the United States.

The act includes R&D for recycling projects ($60 million), partnerships with retailers ($15 million) and with state and local governments ($50 million). The electric drive vehicle battery recycling and second-life applications program ($200 million) is focused on making electric vehicles batteries easier to recycle. And there is a plumb $750 million of grants for recycling companies to re-equip, expand or establish a manufacturing facility.

As we see all these details, two others are worth mentioning. First that the USA has just achieved for the month of September a penetration rate of 5.6% of all new cars being plug-ins according to Atlas EV Hub (so both Battery EVs and Plug in Hybrids). Around the world, when full and open subsidies are in play, EV sales leap by around 7.5% from one year to the next – and in the US, because EV subsidies are currently limited to the first 200,000 sales of each manufacturer. This has penalized Tesla, which has long since passed this 200,000 mark and this has been responsible for limiting the growth in US EV car sales, from 2.1% of all car sales last year to peaking at 5.6% in September. We calculate that it would have been closer to 9% had the subsidies been the same for all buyers.

The new tax based rules are also likely to skew results, with up to $12,500 in tax credits up for grabs – but if your workforce is not unionized this falls to $8,000 and if your battery is not made in the US it goes down to $7,500. Because it is a tax credit, if you don’t pay this much annual tax, you can only claim as much tax as you pay – so it limits purchases among the poor.

The new legislation once finalized may also call for only US built vehicles to be eligible after 2027.

As a comparison it’s worth noting that a European Government which has fully and openly embraced EVs – the Netherlands, having a higher number of EV charge points per EV purchased – has just hit 28% of cars sold there being plug ins. It was where the US was two to three years ago and it shows how an open approach is far better than attaching a ton of rules to the subsidy. But then again the Netherlands has a far smaller car industry to protect.

Figures out in France this week show it too has reached a 23% share of the market too last month, so the US has some way to go to catch up Europe, so the Biden plan had better work.