Suppose a Presidential candidate proposed a policy that would produce the following benefits: a resurgence of U.S. auto industry production and the creation of thousands of new, high-paying manufacturing jobs; cleaner air, lower health care costs, and a huge reduction in the largest source of American greenhouse gas emissions; lower consumer costs of owning and operating vehicles; and the elimination of dependence on foreign oil.
Too good to be true? Not at all. These and many other benefits will accrue if the U.S. becomes the global leader in the production and deployment of electric vehicles.
Yet, right now, America is losing the EV race. We are allowing China and other nations to capture the single most important manufacturing and environmental opportunity in the world.
Leading experts predict that electric vehicles will overwhelmingly drive global auto industry growth over the next decade—from only about 1.1 million EVs produced worldwide last year to a staggering 30 million annually by 2030.
Ominously, China is already dominating the emerging EV market, with about 40 percent of global production, and plans to expand even more rapidly over the next few years. The United States, on the other hand, currently produces only about 20 percent of the world’s EVs and its market and production are not growing as quickly. Overall, China now produces more than 25% of all manufacturing globally, up from just 8% in 2000, while the US share dropped from 22% to 15% over the same period.
A new paper from the Progressive Policy Institute urges Congress to jumpstart domestic EV production and sales by passing robust consumer and manufacturer incentives. It finds that current tax incentives are inadequate, largely benefiting a small group of wealthy car buyers but not reaching the mass of middle class motorists or being applicable to the SUVs, minivans, and light trucks that are popular with consumers and profit-centers for industry.
While the current federal tax credit offers $7,500 for the purchase of any all-electric vehicle, its caps the credit at 200,000 vehicles per manufacture, and Tesla and GM have already hit the limit. Several Members of Congress have proposed extending the existing $7,500 credit with no cap per manufacturer, but even these changes are highly unlikely to drive large rapid electrification of the US fleet before foreign competitors do.
Instead, Congress should be far more ambitious, providing consumer tax credits that are more generous for cheaper vehicles than for expensive ones, encouraging the sale of more affordable electric vehicles in large numbers. This “reverse scale” credit could be structured as follows: $7,500 credit for vehicles priced under $35,000; $5,000 for those under $50,000; $2,500 for those under $75,000.
In addition to a graduated tax credit, Congress should provide extra consumer tax incentives for trading-in low mileage “gas guzzlers” for the purchase of an EV to quickly turn over fleet and eliminate the most inefficient, polluting vehicles. Moreover, Congress should provide manufacturer tax credits within each class of vehicle, including SUVs, minivans and light trucks, to drive rapid production and demand for popular models that are most lucrative for companies. And to encourage rapid growth and large-scale production, the manufacturer tax credit should become greater for production over a certain high total threshold of vehicles produced.
Opinion polls find that nearly three quarters of consumers say a tax credit would affect their decision to buy an EV, and 63% say a credit is an important measure to support EV adoption.
But for EVs to quickly grow, the federal government and the states will need to invest rapidly in public and private incentives for building out a network of accessible electric charging stations through desperately-needed national infrastructure legislation.
Congress should also require that going forward all new federal government vehicles must be US-made EVs for most purposes (and other alternative like compressed natural gas or fuel cells as needed for some other uses like buses and heavy-duty trucks, at least for now). The federal government could also raise or restructure Corporate Average Fuel Economy standards for an added push toward EVs. And in order to gain the full reductions in air pollution and greenhouse gas emissions, Congress will need to make sure that the electricity sector relies on increasingly clean energy sources through a national low-emissions electricity standard.
Finally, the US must begin to produce more of the minerals that are crucial to EV batteries. Today, China produces more than 60% of the lithium-ion batteries that power EVs, while the US output is only 5%. And the US is increasingly reliant on imports of lithium and other key minerals, with imports of lithium doubling in just the last five years. In sign that some in Congress are beginning to wake up to the challenge, Senate Energy and Natural Resources Committee Chair Lisa Murkowski is planning to introduce legislation to expedite permitting for lithium and other key materials mining, encourage mineral recycling and other measures to boost US production.
Fifteen years ago, the U.S. allowed Chinese subsidies to displace U.S manufacturers and dominate the global race for solar panel manufacturing—and today China owns more than 60 percent of the global market. America cannot allow that to happen with EVs, which under any scenario will be an essential part of the next generation of global clean energy technology and auto manufacturing.
Despite his promises to lead a rebirth of US manufacturing, President Trump has done nothing to make America the EV leader; in fact, Trump’s recent budget proposes repealing even existing EV tax credits. And when GM stopped production its Lordstown, Ohio plant recently, Trump blamed the company and simply urged GM to continue producing the poor-selling Chevy Cruze.
But that failed approach wouldn’t create new US jobs, or lead to US innovation and global competitiveness, or cut greenhouse gas emission or end oil imports. GM itself has said that the most likely scenario for reopening the Lordstown plant is to produce EVs, but needed demand for EVs is still lacking.
It’s time Congress, and Democratic Presidential candidates, proposed detailed, ambitious plans to help the US industry and American consumers speed far more quickly into the lead in the global EV race. It’s a race America cannot afford to lose.
