US Revs Up Electric Vehicle Race: Can Biden’s Plan Catch China and Dominate the Market?

In recent years, the structure of the U.S. automobile industry has undergone significant adjustments: the prevalence of new energy vehicles in the market has demonstrated a consistent upward trajectory, while the prominence of traditional energy vehicles (fuel-powered vehicles) has waned. Particularly within the last half-decade, the sales figures for new energy vehicles have surged. Presently, the new energy vehicles available in the market chiefly comprise three categories: pure electric vehicles, plug-in hybrid vehicles, and fuel cell vehicles. Taking pure electric vehicles, constituting 70% of this spectrum, as an illustration, in 2019, these vehicles represented approximately 2% of new car sales in the United States. By the period spanning from January to September 2023, sales of pure electric vehicles had ascended to 880,000 units, constituting 2% of new car sales within the United States. This proportion soared to 7.5%. Projections indicate that by 2023, sales of pure electric vehicles in the United States will encompass 9% of all new car sales, reaching a range between 1.3 million to 1.4 million units. This milestone marks the inaugural occasion wherein annual electric vehicle sales in the United States surpass the 1 million unit benchmark.

Despite the notable progress achieved by the United States in its automotive electrification endeavors, it still trails behind China and European nations. Reports indicate that in the initial six months of 2023, the sales ratio of electric vehicles (encompassing pure electric vehicles and plug-in hybrid vehicles) in China and Germany attained 33% and 35%, respectively. Nonetheless, as the Biden administration expedites the restructuring of the new energy vehicle industry chain, anticipations suggest that by 2025 and 2030, global sales of new energy vehicles in the United States will experience a substantial upsurge, potentially diminishing the market share of Chinese automotive companies on the global stage.

The Biden administration’s reconfiguration of the new energy vehicle industry chain

Following the semiconductor dispute between China and the United States, the Biden administration has designated the new energy vehicle industry as a pivotal strategic sector, with the new energy vehicle industry chain assuming paramount significance in the Sino-U.S. geopolitical landscape. To safeguard the interests of domestic American car manufacturers and enhance the resilience of the American supply chain, alongside bolstering its stake in the global new energy vehicle market, the United States is accelerating the reconstruction of the new energy vehicle industry chain.

Shortly after assuming office, Biden commissioned an evaluation of crucial minerals within the upstream segment of the new energy vehicle industry chain, along with large-capacity batteries in pivotal junctures, underscoring that “large-capacity batteries utilized in new energy vehicles and grid storage exert a profound influence on the U.S. economy and national security.” On August 5, 2021, Biden unequivocally expressed the imperative for the United States to lead the world in new energy vehicles, establishing a target for the new energy vehicle industry: by 2030, half of all new passenger cars and light trucks sold in the United States shall be zero-emission vehicles. Subsequently, on February 24, 2022, the U.S. Department of Energy unveiled the “Supply Chain Assurance Strategy for the U.S.’s Clean Energy Transformation,” delineating the developmental trajectory for the new energy industry across seven dimensions, constituting the inaugural U.S. strategy aimed at fortifying the clean energy supply chain.

In terms of concrete measures, the Biden administration has introduced an array of policies pertaining to critical minerals, charging infrastructure, consumer tax incentives, and producer tax breaks. To ensure a consistent supply of critical minerals within the upstream echelons of the new energy industry, the Biden administration has launched the Mineral Security Partnership, the U.S. Battery Materials Initiative, and the Sustainable Critical Minerals Alliance, earmarking $7 billion through the Infrastructure Investment and Jobs Act to overhaul the high-capacity battery supply chain, augmenting processing, manufacturing, and recycling capacities for critical minerals such as lithium, nickel, and graphite. To ensure the requisite infrastructure for new energy vehicles, the Biden administration has unveiled the “National Electric Vehicle Infrastructure Plan” and the “Electric Vehicle Charging Action Plan,” allocating $5 billion through the “Infrastructure Investment and Jobs Act” to establish a nationwide new energy vehicle charging network comprising 500,000 charging stations, alongside earmarking $2.5 billion to erect charging facilities within communities. In a bid to render new energy vehicles more appealing to consumers, the Biden administration has perpetuated the new energy vehicle tax credit policy initiated during the Obama era, while augmenting tax credits for eligible new and used cars to $7,500 and $4,000, respectively. Moreover, the administration provides investment tax credits and advanced manufacturing production tax credits to the new energy vehicle industry, establishing a $27 billion greenhouse gas emission reduction fund at the federal Environmental Agency, alongside allocating $40 billion in loan authorization to the U.S. Department of Energy’s Loan Program Office and $3.6 billion in credit subsidy support to enhance the competitiveness of new energy vehicle manufacturers.

Multinational automotive enterprises expedite their foray into the North American market

The Biden administration’s preferential policies towards the new energy vehicle industry have invigorated private investment endeavors significantly. According to statistics from the U.S. White House, since the inception of the Biden administration, private entities have injected $134 billion into the electric vehicle and battery sector within the United States. These investments encompass a spectrum of domains, including battery recycling, material segregation and processing, and component manufacturing. In 2023, with the formal implementation of the “Inflation Reduction Act,” investments in pure electric vehicles in the United States have transitioned into a substantial phase of progression, with the majority of multinational automotive enterprises formulating strategic blueprints within the North American new energy vehicle industry chain. Among them, Ford secured approximately $9.2 billion in loans from the U.S. Department of Energy’s Loan Program Office to establish three battery factories. In terms of investment locales, North Carolina, Michigan, Ohio, Missouri, Kansas, and other Midwestern states within the United States have emerged as prime destinations for major multinational corporations. Examining specific entities, Toyota has committed a total of $5.9 billion towards establishing a car battery factory in North Carolina, slated to commence operations in 2025. Toyota’s Kentucky plant is slated to commence electric vehicle production in 2025. Hyundai, headquartered in South Korea, aims to invest $5.5 billion in electric vehicle and battery production in Georgia, with its total investment in the United States projected to reach $7.4 billion by 2025. Honda and LG disclosed a $4.4 billion investment in a battery manufacturing joint venture in the United States, while Panasonic plans to invest $4 billion in constructing a battery factory in Kansas.

Rapid growth anticipated in U.S. new energy vehicle sales

Empirical analyses suggest that the United States’ overhaul of the new energy vehicle industry chain may partially mitigate the disparity between the United States and China in the realm of new energy vehicles, capturing a portion of China’s share within the global new energy vehicle market. The International Energy Agency posits that the United States’ industrial chain restructuring policy could compel global new energy vehicle enterprises to recalibrate their production layout. While the short-term impact may be marginal, over the medium and long term (five years and beyond), it is anticipated to facilitate rapid growth in new energy vehicle sales within the United States and the broader North American region. This surge in volume is poised to elevate its share within the global new energy vehicle market, consequently mitigating competitive disadvantages.

From a global perspective, forecasts by the International Energy Agency suggest that under the influence of the U.S. government’s industrial chain restructuring policy, new energy vehicle sales in the United States are projected to reach 3.34 million units in 2025 and 7.76 million units in 2030, constituting 16.29% and 21.03% of total global sales, respectively. This signifies an increase of 6.58% and 11.32%, respectively, compared to 2022 figures. Conversely, China’s new energy vehicle sales may amount to 9.7 million and 14.6 million vehicles during the same timeframe, accounting for 47.32% and 39.57% of total global sales, respectively, reflecting a decrease of 10.52% and 18.27% compared to 2022. Sales in Europe during this period are anticipated to total 5.2 million and 9.6 million, constituting 25.37% and 26.02% of the global market, respectively, akin to the 25.49% share witnessed in 2022. Ergo, in 2025 and 2030, China’s relinquished market share is anticipated to be absorbed primarily by the United States and other regions.

Nevertheless, historical disparities between the Republican Party and the Democratic Party in the United States pertaining to energy industry policies have been prevalent. Republicans typically endorse traditional fossil fuels, while Democrats lean towards the development of new energy resources. Should the Republican Party secure victory in the 2024 U.S. election, the fate of the “Inflation Reduction Act” implementation would be shrouded in uncertainty, engendering ambiguity regarding the developmental trajectory of new energy vehicles within the United States.

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