The EV Effect
Innovation and popularity of the electric vehicle industry has reached new heights recently, as the push for saving our environment through cleaner emissions are taking root in America. The United States is behind in the EV industry when compared to their competitors, but is beginning to take initiative and eliminate gas-powered cars from their roads. Currently, China’s EV market is three times as large as the United States’, but this could soon change as President Biden is proposing a substantial $174 billion investment in the EV market, with hopes to increase domestic supply chains, create American jobs in the industry, and provide sale rebates and tax incentives to encourage both consumers and producers (“The American Job Plan” 2021). Although this infrastructure package is still being debated, the Biden administration has already taken many other steps in promoting a cleaner and more fuel-efficient future.
On August 5th, Biden proposed a new mileage standard of 52 mpg by the 2026 models produced by automakers in America. To put this in perspective, President Obama set a standard of about 51 miles per gallon by 2025, but it was later replaced by a standard set by the Trump administration of only 44 miles per gallon by 2026. The Trump administration was advocating for more time to be allowed for these innovative electric vehicles to become safer and more affordable; However. this rollback upset millions across the nation as automobile manufacturers stuck to the original eco-friendly standard, and some even conceived a “secret deal” with California in order to increase the gas mileage and better the greenhouse gas emissions standards in the influential state. This contradicted the policies set by the federal government and led to a threat of revoking California’s ability to set its own standards, but the belief in the future of EV was shown as at least 13 other states followed California (Beal 2021). Only months later this rollback was overtaken by the ambitious Biden administration policies, which some see still as too weak. Biden strengthened the mileage standards and promised a plan to set even tougher regulations for vehicles produced beyond 2026. There is still optimism that congress will pass a scaled-down version of Biden’s infrastructure plan that includes massive subsidies and incentive programs for governments and automakers in order to increase production and demand in the EV market. With these incentives and rebates, Biden has received a voluntary pledge from some of the top automakers to cut down on their gas-powered engines production and transition more research and development into the EV industry, with a promise of 40-50% sales being electric by 2030 (Beal 2021).
Some environmentalists believe we are on the right track to saving our environment from gas-engine carbon emissions but need to take more drastic measures. The executive orders by Biden are not binding, so automakers have no obligation to adhere to their promises or follow the policies that are still under consideration by Congress. Simon Mui, from the Natural Resources Defense Council, stated: “This proposal helps get us back on the road to cleaning up tailpipe pollution, but given how climate change has already turned our weather so violent, it’s clear that we need to dramatically accelerate progress” (Associated Press 2021). Voluntary pledges by profit-driven companies will not be enough to save our environment from the many negative effects of carbon emission going forward. In 2020, under 2% of retail sales were electric vehicles in the United States, with only 30 electric engine vehicles available for purchase (James 2021). These pledges by automobile producers promise more options and a larger push towards selling electrical vehicles, but some obstacles still lay ahead.
The regulations put in place must incorporate pollution cuts, business incentives, cheaper options, and domestic jobs. Opponents of a fast transition from gas to electric engines “argued that relatively cheap U.S. gasoline has empowered more U.S. households to drive to better-paying jobs and for U.S. businesses to compete globally” (Beal 2021). The United Auto Workers union believes Americans should not transition too quickly to EV due to its effects on domestic jobs and wages but agrees that EV is the future. Currently, the U.S. imports most of the parts for electric vehicles from Asia, particularly China, like the lithium-ion battery (Yu and Sumangil). This means the EV market has historically given jobs and wages to foreign nations, and so the UAW union believes a hasty transition into the EV market will hurt the U.S. economy.
The future of the automobile industry is EV, and the U.S. has elevated its involvement in this transition for many reasons. Consumers know of this future and want new generations of vehicles to be more fuel-efficient each year. In a fuel economy survey conducted by Consumer Reports, it was discovered that 94% of consumers felt fuel economy was the most important quality when purchasing a new car, cited twice as often as price (Friedman et al. 2021).
Why aren’t more companies producing these cars if they are in such high demand? Many consumers are unwilling or unable to accommodate for the higher selling price of EV. This will soon be an outdated problem as the automobile industry stated it will invest more than $300 billion in electrification by 2025 and will develop 130 EV models of 2026 (Associated Press 2021). The EV cost gap will deteriorate and be mitigated as production volumes increase and the technology advances, along with the implementation of additional federal tax credits, incentives, and savings from fuel cost. The stricter mileage standard proposed by Biden is expected to save consumers $900 annually in gasoline and will cut car emissions by 2 billion tons (Beal 2021). The transportation sector accounts for almost 30% of the nation's total carbon emissions, which makes gas-powered engines the largest contributor towards climate change. Scientists state there have already been drastic human-caused global warming effects due to gas-engine emissions, like increasing temperatures, rising sea levels, worsening wildfires, droughts, floods, and storms globally (“Car Emissions and Global Warming'' 2014). Federal and state governments realize this and have incentivized all steps of the supply chain for the EV industry and provided tax benefits to consumers. Buyers of new EVs can profit from $7500 in tax credit in the year of purchase and EV charging stations installed by the end of 2021 year receive $1,000 off (a policy set in order to incentivize a faster transition to an EV). State governments have their own incentives and subsidies in addition to those of the federal government; for example, California has over thirty incentives and tax credits in place, some that reward up to $80,000 in workplace rebates for installing and operating specific charging ports for public use (“Federal and State Electric Car Tax Credits, Incentives & Rebates” 2021).
It is clear that EVs will be the future of the automobile industry, and it is only a matter of time before they dominate the markets. Although there are many obstacles they need to conquer, with the correct government incentives and subsidies, consumer sentiment and demand will continue to grow as companies produce more affordable electric vehicle options. The future is bright as the EV market is set to expand exponentially over the next few years. It is our goal to shift EVs from niche to normal, and make gas-powered engines a relic of the past.
References
Associated Press. “Biden Administration Proposes New Mileage Standard AS Toyota, Ford and Other Automakers Agree on EV Goal.” MarketWatch. MarketWatch, August 5, 2021. https://www.marketwatch.com/story/biden-administration-proposes-new-mileage-standard-as-automakers-agree-ev-goal-01628155223?mod=article_inline.
Beals, Rachel Koning. “From Gas Savings to Tax CREDITS: 7 Things to Know about Biden's New Electric Vehicle and Mileage Rules.” MarketWatch. MarketWatch, August 5, 2021. https://www.marketwatch.com/story/from-gas-savings-to-tax-credits-7-things-to-know-about-bidens-new-electric-vehicle-and-mileage-rules-11628187632?cx_testId=22&cx_testVariant=cx_1&cx_artPos=7&mod=home-page-cx#cxrecs_s.
“Car Emissions and Global Warming” Union of Concerned Scientists, July 18, 2014. https://www.ucsusa.org/resources/car-emissions-global-warming.
“Federal and State Electric Car Tax Credits, Incentives & Rebates.” Enel X, 2021. https://evcharging.enelx.com/resources/federal-and-state-electric-vehicle-incentives.
Friedman, David, Chris Harto, Alfred J Artis, and Adam Winer. “Consumer Reports Survey: Drivers Want Better Fuel Economy, a Majority Say Automakers Have a Responsibility to Do Better.” CR Advocacy, February 25, 2021. https://advocacy.consumerreports.org/press_release/consumer-reports-survey-drivers-want-better-fuel-economy-a-majority-say-automakers-have-a-responsibility-to-do-better/.
James, Talia. “U.S. Electric Vehicle Market Poised for Record Sales in 2021, According to Edmunds.” Edmunds, February 2, 2021. https://www.edmunds.com/industry/press/us-electric-vehicle-market-poised-for-record-sales-in-2021-according-to-edmunds.html.
“The American Jobs Plan.” The White House. The United States Government, May 4, 2021. https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/.
Yu, Alice, and Mitzi Sumangil. “Top Electric Vehicle Markets Dominate Lithium-Ion Battery Capacity Growth.” Accelerating Progress, February 16, 2021. https://www.spglobal.com/marketintelligence/en/news-insights/blog/top-electric-vehicle-markets-dominate-lithium-ion-battery-capacity-growth.
