How many Electrons flow may depend on the Election
The Power of Federal Policy
As I sat waiting for my car to be serviced the other day, I struck up a conversation with one of the salesmen. I thought I’d wander around the lot and check out the plug-in hybrids and EVs. He graciously offered to help, but wanted to temper my expectations a bit: “Yeah, we aren’t stocking a lot of EVs right now. We’re waiting.” Waiting, I asked? “Yep. Waiting for the Election.”
His statement stopped me in my tracks. I was genuinely surprised. But the thought process behind his statement quickly became clear. The ripple effects of the upcoming election are going to be felt far and wide. And the future of electric vehicles may very well rise or fall based on the outcome. As I’ve been trying to describe throughout this Substack, a transition to electric vehicles won’t be achieved solely from auto manufacturers making them. There has to be a robust system to support them and the US federal government has played a significant role in creating and enabling some of those systems. Just over the last few years, the US government has supported a transition to EVs through at least four important mechanisms:
The first is the one that is most discussed – a $7500 tax credit for those who purchase a new EV (or $4000 for a used EV) that meets certain requirements. Those certain requirements are focused on supporting American manufacturers as much as possible and avoiding money going to certain countries (like North Korea) as much as possible. As a result, only 22 of the 110 EV models on sale in the US qualify for this credit. But since it currently costs more to build an EV than it does to build a gasoline powered car, these tax credits likely put EVs into the reach of some Americans that otherwise wouldn’t have been able to afford them.
Second, in 2021 Congress passed the Infrastructure Investment and Jobs Act, which included several million dollars to create a National Electric Vehicle Infrastructure program at the Department of Energy. This program provides 7.5 billion dollars of funding to state governments to build electric vehicle charging infrastructure. The more robust the charging infrastructure is in the United States, the easier day to day life with EVs will be.
Third, the Inflation Reduction Act passed by Congress in 2022 allocated 3 billion dollars for the federal government to purchase new electric vehicles to replace gasoline powered vehicles as they are retired. If your mailman now drives an EV, it’s probably because of this law. These additional orders should help manufacturers spread the cost of R&D more broadly, ideally lowering costs to normal consumers as well.
Finally, both of the laws mentioned above included funding to help address the supply chain issues that became a significant problem during the Pandemic.
While passing laws in the United States Congress right now requires bipartisan support, the Biden Administration is playing a significant role promoting these EV-supporting efforts. This past March, the Biden Administration made an even stronger push for EVs through a new EPA mandated automotive emissions rule. The rule states that from 2026 to 2032, the emissions from automobiles sold in the US must be cut in half. There are a lot of ways automobile manufacturers can work to meet this new rule – including more fuel-efficient cars and cleaner burning gas. But increasing the production of EVs will likely be an important component of their response. If Biden is reelected in the fall, it is very likely that the federal government will continue to be mobilized to support the development of EVs and the networks necessary to keep them running.
It is not precisely clear what the future of EVs would be if Donald Trump wins the election in the fall, but the odds-on favor are that his support of EVs would not be as strong as the current administration. EVs are generally viewed as a way to lessen impact on the environment and decrease reliance of fossil fuels. Trump has traditionally not included either of those as priorities in his campaigns or previous administration. In April, Trump had a meeting with oil executives and, according to Reuters, suggested that if they donated a billion dollars to his campaign, he would (among other things) eliminate the EPA automotive emissions rule that was put in place in March. Such a change would significantly lessen the pending incentives that automakers would have to build, market, and support EVs.
What is curious to me in all of this is not that a presidential election can have a significant effect on an entire industry. We elect presidents to promote very specific values. And it’s clear that the direction of entire industries can be swayed by the actions and policies of a new Chief Executive of the United States.
What I am startled by is the fact that at least some automakers (and auto dealers) may be slowing or, perhaps, even pausing their EV efforts until the outcome of the Election is clear. I guess I shouldn’t be surprised as I’ve done extensive work on how government policies have impacted the direction of the automotive industry in the past. But I sort of had in my head that electric vehicles had a momentum that was well beyond the control of national governments. It seemed to me that public interest in EVs was continuing to climb, infrastructure was being built out, and the numbers of EVs I saw on the road seemed to be ever increasing. Perhaps I’ve spent too much time with enthusiastic EV owners who firmly believe they are helping to usher in the future.
To be clear, the success or failure of electric vehicles will not ultimately be decided in November. The trajectory of technologies are impacted by many, many different forces. But the strategies deployed by automobile manufacturers will depend a great deal on the incentives and support that national governments provide. And November’s election will have an almost certain impact on what industries, values, and technologies are supported by the US federal government.
This post was updated to note that the meeting that Donald Trump had with Oil executives was held in April, not in May.