As Donald Trump goes all-in on electric vehicles and China becomes an “EV export giant,” the Biden administration is looking to keep the nascent U.S. EV industry alive and thriving.
On Thursday, the administration announced $2 billion in grants for fossil fuel-powered vehicle manufacturers and their suppliers. The money will be used to convert those factories into electric vehicle and parts manufacturing operations while preserving traditional auto workers’ jobs. The money was approved by Congress as part of the so-called Reducing Inflation in 2022 Act.
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The U.S. auto industry is concentrated in the Midwest and South, and most of the 11 grants announced by the Energy Department will go to key states: Michigan, Ohio, Pennsylvania and Georgia. Factories in Democratic states Illinois, Maryland and Virginia will also receive grants, as will Republican state Indiana.
“This is a big deal, relatively speaking,” said Arun Kumar of consultancy AlixPartners. “The timing is right because when you have doubts about what the future will look like, it’s good to get good news.”
By doubt, he's referring to forecasts from his firm and others that show EV sales growth is slowing. He also said a change in the White House this fall adds to the uncertainty. It's questionable “how policy is going to work if a new administration comes in and doesn't prioritize pushing EVs,” he said.
Still, expect the American auto industry to remain committed to electric vehicles, in large part because China has become the world's largest EV maker and is growing rapidly, exporting all over the world (Europe, Asia, Australia, Russia and more) though not much in the U.S. yet. Driven largely by low wages, long working hours and heavy state subsidies, cars are priced significantly lower, and many models have won praise from auto critics for their high quality.
In May, the United States responded by erecting a high wall to keep the vehicles out, at least for now: a 100% tariff that eliminates China’s price advantage and then some. Europe followed suit with smaller, but even stricter, tariffs.
If China continues to push for cheaper electric vehicles — better for consumers’ wallets and the climate — other countries will find it increasingly difficult to resist, even if domestic jobs are at stake. That’s why automakers around the world know they can’t stop making more electric vehicles and making them cheaper, Kumar said.
California will not receive any of the grant money because no motor vehicle factories have recently closed or are considered to be in imminent danger of closing.
Not that there’s much to close in a state that was once a major automaker. Despite spending billions of dollars to subsidize EV makers and buyers in the state, only two major electric vehicle assembly plants remain in California: automaker Tesla’s in Fremont and electric bus maker BYD’s in Lancaster.
The California Energy Commission awarded an electric bus manufacturer a $3 million grant for a new factory in the City of Industry, which opened in 2020. Three years later, the company, Proterra, closed the factory and moved its manufacturing to South Carolina, before filing for Chapter 11 bankruptcy a few months later and breaking up.
The Biden administration said companies that received the grants agreed to retain or rehire large numbers of the traditional auto industry workforce, pledged to train them for electric vehicle work and promised to pay them higher-than-average wages.
The grants cover up to 50% of the cost of converting a factory, with companies covering the remainder.
Recipients include:
- General Motors: $500 million to convert a Cadillac internal combustion plant in Lansing, Michigan, to build electric vehicles.
- FCA North America, a division of Stellantis: $334 million to reopen a recently closed Jeep Cherokee plant in Belvidere, Illinois, to make previously unidentified electric vehicle models.
- Volvo: $280 million to build Mack and Volvo heavy-duty electric and fuel cell trucks in Pennsylvania, Virginia and Maryland.
- Harley-Davidson: $89 million for an electric motorcycle plant in York, Pennsylvania.
- Blue Bird Body Company: $79 million to build a new line of electric school buses at the site of a former mobile home manufacturer in Fort Valley, Georgia.
- Cummins: $75 million to convert an internal combustion product line in Columbus, Indiana, to make battery packs and other electric propulsion system parts.
