Automakers All In On New EV Battery Factories. Thanks, Joe Biden! And Joe ... Manchin?
There have been some very good arguments against the "domestic content" requirements that West Virginia Sen. Joe Manchin added to the Inflation Reduction Act's $7,500 tax credit for new electric vehicles. Where the credit had previously been available for all new EV purchases, Manchin's new requirements meant you could only get the credit on EVs manufactured in North America, phasing in additional requirements that to get the full credit, the battery pack and even the minerals used to make the batteries had to be sourced in the US, Canada, or Mexico, with the percentage of that content ramping up over time. That excluded EVs built by foreign manufacturers, and even some domestic EVs with non-US sourced batteries, and people yelled boo, Joe Manchin, boooooo. At least about the EV credits; the rest of the bill is pretty awesome. (The new $4,000 credit for purchasing a used EV isn't subject to the domestic content restrictions, either.)
I still think that, for the sake of reducing emissions quickly, it's smarter right now to incentivize getting more people into EVs than to focus on US manufacturing of the things, and the domestic content stuff could have waited another five years to kick in, at least.
That said, Axios reports that a whole 'nother part of the IRA, separate from the consumer incentives — and as far as we know, not part of Manchin's fiddling with the bill — is already spurring big plans for auto and parts manufacturers to build battery-manufacturing plants in the USA, which should have the knock-on effect of making more EVs eligible for the consumer rebates as well. That's one of the cool things about the climate plan that Biden largely inherited from Jay Inslee in the 2020 campaign: A lot of the parts work together to amplify the transition to clean energy and green manufacturing.
As Axios explains — with all the required bullet points and listicles you'd expect — the climate legislation offers manufacturers their own incentives to ramp up domestic battery manufacturing, to boost the creation of a US supply chain for EV manufacturing. The industry response has been very enthusiastic, and in facts some experts believe "the value of those [manufacturer] tax credits may be four times higher than Congress' budget experts anticipated."
The incentives for battery manufacturers are pretty good, offering
a tax credit of $35 per kilowatt-hour for each U.S.-made cell, which slices their production costs by a third.
Example: If a manufacturer produces 70-kWh batteries for 1 million vehicles, its total credits would be worth $2.45 billion a year.
So apparently, if you rebate it, they will come. Companies "announced more than $73 billion in planned U.S. battery plants in 2022 alone, according to Atlas Public Policy," and the announcements keep on coming. The Congressional Budget Office estimated last year that the total industrial tax credits — not just for EV batteries, but for the whole shootin' match including wind and solar manufacturing — would total about $30.6 billion for the 10 years of the IRA.
Somehow we doubt House Republicans will demand "money for automakers" be subtracted from the budget in the debt ceiling fight. Maybe they'll just demand equal money for gas stoves.
But wait, there's more bullet-listed stuff!
• The actual total will almost surely be much higher, thanks to a surge of new battery plants across the country.
• One estimate, prepared by Benchmark Mineral Intelligence for Axios, pegs the cost of the battery rebates at $136 billion over 10 years — and Tesla has already announced new plans that will drive the number even higher.
Axios also notes that Tesla alone expects to collect a billion dollars in the battery credits in 2023, and that the company is ramping up production at its battery plant in Nevada, which
will soon be able to produce 100 gigawatt-hours of battery cells, and that could grow to 500 gigawatt-hours in the future. At an annual production rate of 500 gigawatt-hours, the credits would be worth a staggering $17.5 billion per year.
Ford and GM both have big battery plants planned, in conjunction with Korean battery manufacturers that want to get in on the US transition to EVs as well. Ford expects around $7 billion in tax credits between 2023 and 2026, sez Axios, and GM anticipates its eventual battery tax credits to amount to $3,500 to $5,500 per vehicle.
And yes, there's every reason to expect the tax credits will help bring down the prices of EVs, just as other new tech has become more affordable. And when more manufacturers are sourcing their battery materials and building the batteries in the US, that also means more models will qualify for the full EV tax credit.
Also, here's a neat data point: Overall US new car sales fell in 2022, but more of the cars that consumers were buying were electric, with a 65 percent increase in EV sales over 2021. EVs still only made up 5.8 percent of US auto sales, but that's up from 3.1 percent in 2021.
And while Tesla remains the biggest EV manufacturer, it's losing market share as traditional automakers expand their EV offerings. In 2021, Tesla had 72 percent of the US EV market, but that slipped to 65 percent in 2022. Ford now has, distantly, the second biggest chunk of the EV market (7.1 percent) with Hyundai/Kia combining for 7.1 percent. Unfortunately, supply-chain problems (hi, the post-pandemic snarl is still with us) have limited the rollout of Ford's electric F-150 Lightning pickup; in September, deliveries of the new wonder truck with the MEGA POWER FRUNK were temporarily halted because — we swear we are not making this up — the factories ran out of those blue oval "FORD" badges for the front of the trucks.
So sure, some kinks still being worked out, but at some point we'll be making enough computer chips and the Biden industrial policy will be creating more jobs, and we may even find a nice thing to say about Joe Manchin again in a year or two.
[Axios / Inside EVs]
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