President Trump just dropped his “America First” energy plan and, not surprisingly, it doesn’t include renewable energy or electric vehicles. It does, however, mention the importance of protecting clean air and clean water though it also encourages the very energy sources that pollute both of these public goods. Weird.
President Trump’s beachhead teams are swiftly infiltrating the federal agencies meaning that the policies that helped electric vehicles during the Obama years could soon get scaled back or dismantled altogether. The electric car has already been killed once, will it be killed again?
(TL:DR – probably not, given the demand for clean transportation outside of the U.S. and the declining cost of electric vehicle batteries).
Federal support for EVs has been important
Electric vehicles (EVs) have needed federal support to compete in a market that has been dominated by the gasoline engine and a reluctance from automakers to invest in new technologies like seat belts or fuel efficiency. Aside from the federal tax credit of up to $7,500 for buying an EV, the Obama Administration enacted a series of initiatives that helped EVs to gain a finger hold in the national vehicle market. The Department of Energy provided low cost capital to Tesla, Ford, and other automakers seeking to develop EV manufacturing plants, the Department of Transportation began to make on-the-go charging easier by identifying highway corridors ripe for EV chargers, signage, and investment, and our national laboratories helped cut battery costs from over $1,000 per kilowatt hour to around $200 per kWh.
Battery costs have continued to fall, helping meet the increased demand for electric vehicles. Source: Bloomberg New Energy Finance.
State support has been critical too
State-based policy has also been instrumental in helping EVs succeed. The California Zero Emission Vehicle Program, for example, requires automakers to sell EVs in California or obtain credits from other automakers that sold EVs in the Golden State (see: Tesla’s business model). In 2018 this program will require automakers to sell EVs in 9 other states that have adopted the California program, and which collectively make up about a quarter of the national vehicle market. Other states have EV policies too, and mayors, governors, and other elected officials across the country have pledged to continue state and local support for EVs.
Thanks in part to federal and state policy, consumers are now able to access many more electric vehicle options compared to 2011. More EV offerings from more automakers are planned in the next couple years, which will help the EV market continue to grow. Note that all BMW i3s were considered BEV, though some were the range-extender models that are PHEVs. Source: ucsusa.org
How President Trump can affect the electric vehicle market
Maybe President Trump will try to undo all of this policy support, maybe he won’t. I can’t find any mention of his possible stance on EVs, though I’m encouraged that he met with Tesla CEO Elon Musk and other automaker CEOs in his first week in office. I’m also discouraged by recent comments from Ford’s CEO on his hope that the President will ease fuel economy standards.
In theory, President Trump and Congress could not only dismantle federal EV support – through repealing the federal EV tax credit and halting federal EV programs – they could also attempt to repeal the sections of the Clean Air Act that both grant California the unique authority to set its own pollution limits and allow other states to follow California’s lead. There’s been no indication that the President or Congress will take this route, but lawmakers have taken swipes at the Clean Air Act in the past and it’s important to recognize the power of the federal government to impede state authority to combat climate change.
Don’t get too worried, though. The UCS #geeksquad is keeping a close eye on Congress and the new Administration and are always ready to help you join the fight against efforts to stop the progress our country has made toward reducing oil use and climate change pollution. Interested in finding out how you can get alerts for future engagement opportunities? Head on over here.
EV sales continue to rise even as gasoline prices decline. Sources: InsideEVs.com and U.S. Energy Information Administration.
The electric vehicle market can survive even without U.S. policy support
Join me on Hypothetical Avenue for a moment, won’t you? Assuming that U.S. policy support for EVs is put on hold, there are several indications that the global EV market will continue to grow.
First and foremost, EVs are simply a great product. The Nissan LEAF, Chevy Volt, and Tesla Model S are among the highest rated vehicles on Consumer Reports, and GM’s Chevy Bolt has already been anointed as Motor Trends’ 2017 Car of the Year. I’ve driven many different EV models and am certain that once you get into an EV and press your foot on the accelerator, you’ll be hooked too. They are too much fun to drive to ever want to go back to a gas engine.
Second, driving and owning an EV will save you money. Even though gas is cheap, driving on electricity remains cheaper – by about half. All-electric vehicles, like the Nissan LEAF or Chevy Bolt, also have fewer moving parts and don’t require oil changes or other types of periodic maintenance, meaning that their maintenance costs are forecast to be 35 percent lower than a comparable gasoline car. Overall, owning an EV can save you thousands in fuel costs over the vehicle’s lifetime.
Driving on electricity is still cheaper than gasoline. Source: egallon.gov.
Third, they pollute considerably less than comparable gasoline vehicles and, when charged by energy sources other than coal, can help abate the heavy air quality pollution that plagues many cities around the world. As I type I’m listening to a news report from London where a recent spike in air pollution was the highest level recorded since April 2011. Cities in China, India, and other densely populated areas also experience poor air quality due, in part, to transportation emissions. Since all-electric vehicles don’t produce any tailpipe emissions, many leaders outside the U.S. recognize the great potential for EVs to make air cleaner and safer – especially for children and the elderly in urban areas who are more vulnerable to air quality-related health impacts.
Fourth, car companies – both newcomers like Tesla and Faraday Future, and also incumbents like GM and BMW – have heavily invested in EVs and staked their part of their reputation on EVs succeeding. The U.S. vehicle market accounts for only a fifth of global vehicle sales and other regions with fast-growing vehicle markets, persistent air pollution problems, and a commitment to combat climate change will continue to generate demand for EVs. While U.S. momentum on fuel economy and EVs may well slow under President Trump, any automaker that considers itself a global player won’t be able to – or won’t want to – simply stop work on next-generation vehicles because the global demand for vehicles that are cheaper and cleaner to drive will persist.
Of course, to generate true mass appeal an EV’s sticker price needs to be at least competitive, if not less than, a comparable gasoline-powered vehicle. Today, the upfront cost of an EV in the U.S. is partially offset by the federal tax credit and any additional state tax credits. EVs are generally more expensive that a similar gasoline-powered vehicle because (a) EVs are not made at the same scale as conventional vehicles and (b) lithium-ion batteries remain somewhat costly to produce. So, as the global vehicle market demands more EVs and they are made at bigger scales, costs will come down to some extent.
But the larger potential cost reduction comes from reducing battery costs, which have fallen 70 percent in the last 18 months and which the National Academies of Science forecast to be cut in half by 2020. In addition, there could be more breakthroughs in battery chemistry research (also applicable to cell phone batteries and other electronics, which are driving investment in battery R&D too) that could make EV batteries even cheaper. These two factors have led some auto industry analysts to forecast that EVs will be cheaper to own than conventional cars by 2022.
But the electric vehicle market will thrive if the U.S. continues to lead the way
Given the rising global demand for vehicles that cut tailpipe emissions and the potential for battery costs to come down to the point at which an EV is either the same price or even cheaper than a similar gas vehicle, EVs will likely remain on a path to success under President Trump – even if he does his best to dismantle those pesky government regulations that protect our health and environment.
However, the optimist in me thinks the President can recognize the potential for the U.S. to seize the opportunity to be the leader in the emerging clean transportation economy and continue producing clean vehicles (and jobs) here at home.
There’s a strong case to be made for why EVs can and should be an American export. Tesla – an American company – may become a global leader in EV sales and will soon begin producing lithium-ion batteries from its “gigafactory” in Nevada. The Nissan LEAF, one of the most popular EVs for sale, is made in Smyrna, Tennessee along with its batteries. And General Motors has not been shy about investing in EVs, with its plug-in hybrid Chevy Volt and all-electric Chevy Bolt both coming from assembly lines in Michigan.
But foreign automakers are just as keen to win the race to electrify the global vehicle market. BMW, the VW conglomerate, and Chinese automaker BYD, for example, have all poured billions into EVs and would gladly become the primary supplier of EVs for households across the U.S.
Tesla’s are being made in Fremont, California, and their battery production is set to ramp up from the Tesla “gigafactory” in Nevada. Source Wikicommons.
Ultimately, the automaker that becomes the dominant EV supplier will likely be the one that operates in a supportive and stable policy environment. Under President Obama, domestic automakers were not only bailed out, but they were given great incentives to make the U.S. the global leader in clean transportation technology. Now it’s up to President Trump to decide whether to continue the hard won progress some U.S. auto companies (notably GM and Tesla) have made toward becoming the dominant EV exporter and leader, or become just another customer.