Tags: biden | electric | vehicle | china | ev | u.s. | jobs

Biden Needs Winning EV Strategy to Save US Jobs From China

Biden Needs Winning EV Strategy to Save US Jobs From China
EV cars, trucks and busses for export at the Lianyungang Port Terminatl in Jiangsu Province, China (AP)

Peter Morici By Monday, 10 June 2024 11:56 AM EDT Current | Bio | Archive

American and European leaders decry Chinese mercantilism, but more is at play than trade barriers and subsidies in the struggle to dominate the electric vehicle (EV) industry.

Early in this century, Chinese policymakers recognized the importance of the auto sector — it’s a huge user of semiconductors and software —and bet big on EVs. China launched R&D programs for EVs, batteries and related components. It followed with elaborate tax incentives, production and purchases subsidies, and creative regulations. China now produces six of 10 EVs globally and leads in battery production.

China’s potential exports threaten the viability of the U.S. auto sector, especially as federal regulations push Americans to switch from gasoline-powered vehicles.

The U.S. Department of Energy has supported the development of battery technology and offering tax credits to purchase EVs since the Obama administration. U.S. President Joe Biden’s Inflation Reduction Act (IRA) doubled down with aggressive subsidies to encourage U.S. vehicle and battery and vehicle development and production, and offered tax credits for the purchase of domestically produced EVs.

Tesla, for example, has greatly profited from these programs; CEO Elon Musk has built a fully integrated battery and auto manufacturer from scratch.

Yet, some of what American automakers do is tragically inept. The Chinese government has managed to make public EV chargers ubiquitous, whereas the Biden administration has built just seven of the 500,000 public chargers promised through the IRA in its first two years.

Ford Motor , despite heavy price tags and subsidies for purchasers, haven’t managed to earn a profit on EVs. Whereas South Korea’s Hyundai, without qualifying for U.S. tax credits, appears able to sell EVs in the U.S. at a profit and is opening an EV battery and assembly plant in Georgia.

Stellantis , which owns Chrysler, sells EVs at a profit in Europe and plans to introduce eight new models in the U.S., including a Fiat 500e subcompact, Dodge Charger, and Ram 1500 pickup.

Unfortunately for Detroit, the reckoning is coming. New EPA regulations effectively require that about 53% of new vehicles sold be EVs by 2032.

Soon it won’t take incentives or regulatory mandates to persuade more drivers to embrace EVs. Prices for lithium, nickel and cobalt have fallen substantially, and Goldman Sachs is predicting a 40% drop in battery cost, which would take the price per kilowatt hour below $100.

That’s singularity. EVs should then be cheaper to make than gasoline-powered vehicles. A modest Hyundai EV could be sold for less than a gas-powered Chevy, and those EVs would have lower ownership costs.

Over the next five years, modifications to battery designs should substantially increase the amount of power and reduce charging time for batteries. That would virtually eliminate range anxiety and inconvenience on long trips, which currently are major barriers to EV acceptance.

In addition, China’s industry has advantages over Ford and GM, apart from labor costs, that government money can’t buy. China’s automakers have dramatically streamlined design processes and turn cycles for new vehicles by relying more on virtual testing and flexible platforms that permit vehicles to be modified for advances in technology after sale.

Stellantis owes its profitability advantage over Ford and GM to an innovative platform that permits rapid transitions among gasoline, hybrid and EV protypes and allows many different EVs to be built off the same platform.

The U.S. can’t afford to let GM and Ford fail. The legacy auto industry is too important for maintaining jobs throughout their supply chains, but industrial policies have so far not worked. And now Biden is slapping 100% tariffs on Chinese-made EVs.

The U.S. needs a better EV strategy or subsidized Chinese manufacturers will steal American jobs. It would better to let Inflation Reduction Act EV-purchase subsidies expire as planned by 2032 and proceed with Biden’s tariff on Chinese imports — but also tax imported vehicles containing more than perhaps 20% Chinese components.

Plus, give Americans tariff-free access to European, Japanese and South Korean vehicles if they give U.S.-made cars the same allowance. Shutting out competitive imports from Europe, Japan and South Korea won’t foster a more efficient U.S. auto sector. As it stands now, Detroit auto manufacturers are in danger of requiring indefinite subsidies that the U.S. budget can’t bear.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

© 2024 Newsmax Finance. All rights reserved.

U.S. auto manufacturers could require indefinite subsidies that would strain the federal budget. American and European leaders decry Chinese mercantilism, but more is at play than trade barriers and subsidies in the struggle to dominate the electric vehicle (EV)...
biden, electric, vehicle, china, ev, u.s., jobs
Monday, 10 June 2024 11:56 AM
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