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Posted on EVANNEX on January 08, 2022, by Charles Morris
The Biden administration has proposed a number of initiatives to promote transport electrification and clean energy. Three of these are specifically targeted at the auto industry: a reboot of the federal tax credits for EV purchases; a major investment in EV charging infrastructure; and a new set of fuel economy standards. Which of these three programs is the most important, which are most likely to be implemented, and what are the effects of each one likely to be for Tesla drivers in particular?
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Before proceeding further, let’s note that it’s always a risky business to make predictions about government programs. They are always extremely complex, they usually undergo major revisions between the proposal and policy stages, and their real-world effects typically unfold over the course of years, if not decades. The pontification and punditry that follows are based on our best understanding of these proposals as they stand at the current moment.
FEDERAL EV TAX CREDITS 2.0
President Biden’s Build Back Better plan includes a revamping of the system of federal tax credits for EV purchases. The proposed system improves on the existing tax credit in several ways: It would apparently replace the tax credit (which benefits only high-income taxpayers) with a cash rebate; it includes an incentive for buyers of used EVs; and it eliminates the automaker-specific cap that has ended the credits for Tesla and GM, perversely punishing them for being early movers on electrification.
However, there’s one provision of the proposal that’s not popular with Tesla fans—an extra sweetener for vehicles assembled by union labor. Currently, the only automakers that would be eligible for the extra credit would be Ford, GM and Stellantis—all other automakers’ US plants are non-union shops. Tesla CEO Elon Musk, as is his wont, has used some provocative language in opposing the credit, allying himself with oil-company shills such as Joe Manchin (D-Fossil Fuel Industry), who probably don’t want to see any federal support for EVs at all.
Some believe that, while supporting unions may be a worthy goal, it has nothing to do with promoting EVs. Others counter that it has everything to do with bringing unions on board with electrification. A counter-productive “EVs-versus-jobs” narrative is taking shape (encouraged by the oil industry) not only in the US, but also in more union-friendly Germany and Japan. Some Tesla skeptics have found a new theme—portraying EVs as job-killers—so, while union-bashing may be politically popular in places like Texas, it’s probably not in the long-term best interests of the EV industry.
Despite Mr. Musk’s indignation, whether the UAW gets tossed a bone or not is arguably a non-issue for Tesla. It’s hard to see how the amount of the rebate would matter much to a company that’s currently selling every car it can build, and has been regularly raising prices, with no rebates in play.
And Tesla buyers are not what you could call price-sensitive. For those who can afford to invest $45,000+ in a new car, another $4,500 one way or the other is unlikely to affect their purchase decision (although, they may have to pass on a set of premium wheels or a red paint job). No one who’s test-driven a Tesla is likely to bolt for a Chevy Bolt just because it’s a few grand cheaper.
Furthermore, the whole debate, as contentious and entertaining as it has been, is probably moot. As of this writing, Build Back Better is dead in the water, shot down just before Christmas by Manchin. A rebooted EV tax credit may yet pass in some form, but it will almost certainly be less generous than originally envisioned.
BILLIONS FOR NEW CHARGING INFRASTRUCTURE
The Biden administration’s Electric Vehicle Charging Action Plan is a part of the Bipartisan Infrastructure Law, which was signed into law in November, so it’s a done deal (hopefully). However, it isn’t quite the game-changer that we’ve been reading about in some of the credulous media.
The bill establishes two separate programs, and two separate pots of money. The Charging and Fueling Infrastructure grant program will provide $2.5 billion in competitive grants, which can be invested in public EV charging, or in hydrogen, propane or natural gas fueling stations. Much of this money could end up being spent on projects that aren’t directly related to EV charging, and a certain amount will probably end up in the coffers of the oil industry.
The National Electric Vehicle Formula Program will provide $5 billion in “formula funding” for states to use “to build a national charging network.” The wild card here is how much discretion state governments will have as to how to use the funds. Lawmakers in less EV-friendly states will surely find ways to steer some of the loot to pet projects, or to use the federal money to justify reducing state spending on existing EV initiatives. The good news is that support for EVs doesn’t neatly divide along partisan lines, at least at the state level. Some red states have made investments in public charging in the past.
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