BIDEN’S FIRST 100 DAYS: Initial steps on EVs, climate agenda taken — and a new crisis

Industry

As a presidential candidate, Democrat Joe Biden built his campaign around a blueprint to address the COVID-19 pandemic while putting the U.S. on a path toward clean energy to curb climate change, modernize infrastructure and create jobs.

Now, nearly 100 days into his presidency, Biden has laid out the framework for his policy direction through a series of executive orders and other actions that signal to the auto industry Washington is committed to an all-out effort to encourage a transition to electric vehicles and help the auto industry get there, too.

The president’s strategy includes developing tougher fuel-efficiency rules to promote zero-emission vehicles, boosting domestic supply chains to ensure U.S. competitiveness in EVs and other forward-looking technologies, and rebuilding the nation’s infrastructure. The administration last week also committed the U.S. to achieving at least a 50 percent drop in emissions below 2005 levels by 2030 — an effort that supports the president’s goal of having a carbon pollution-free power sector by 2035 and net-zero emissions by 2050.

“The Biden administration has made it clear that forward-looking companies who are planning for an electric future are going to win under his leadership in Washington,” Nick Nigro, founder of EV research group Atlas Public Policy, told Automotive News. “Companies that have been laggards or opponents of using more advanced technologies to reduce emissions, improve fuel economy, et cetera, are going to be hurt by the policies of the administration.”

The president’s support of electrification has significant implications for the auto sector as EVs have yet to gain widespread acceptance among Americans, with range anxiety and relatively low gasoline prices being among the reasons. Automakers such as General Motors are setting targets for EV-only lineups and ramping up commitments to be fully carbon neutral as the administration prioritizes drastic cuts in U.S. carbon emissions. And a host of EV startups including Rivian, Nio, Fisker and Lucid are trying to follow Tesla’s path in elbowing their way into the marketplace.

Still, hashing out the legislative details of Biden’s transportation, energy and climate policies and proposed incentives for domestic manufacturers and consumers is a “route with lots of questions and uncertainties” — including who is going to pay — and not something that can be easily resolved in 100 days, said Barry Rabe, a professor of public policy at the University of Michigan’s Ford School.

“We have the ‘Biden plan,’ but it doesn’t have lots and lots of details in terms of just how it would work and how it would operate,” Rabe said, adding that there are still transitional issues such as appointing people to vacant roles within the EPA and Department of Transportation.

A more immediate concern for Biden since taking office has been the coronavirus pandemic — an ongoing threat that has killed more than 560,000 people in the U.S. — and its effects over the auto industry and economy at large.

Recently, the virus became resurgent in the automaking state of Michigan, where Stellantis’ production of highly profitable Ram pickups has been hampered by COVID-19-related worker absences at the company’s Sterling Heights plant, sources told Bloomberg.

“First and foremost, the auto industry would like to see a return to a growing economy, and that requires controlling the coronavirus,” said Kristin Dziczek, senior vice president of research at the Center for Automotive Research in Ann Arbor, Mich.

Now the industry faces another serious complication: the global shortage of semiconductor chips.

Pinched supplies have forced automakers to halt or limit production and cancel shifts in plants in North America and elsewhere — actions that analysts predict will result in more than a million fewer vehicles produced this year. The industry has formally implored the White House for help amid the crisis.

“Anything that works to stabilize the economy and get us past this pandemic is critical to the auto industry — not just the stuff that is specific to infrastructure, batteries and supply chains,” Dziczek said. “Getting the economy on strong footing, that is positive and a good outcome from the first 100 days.”

On his first day in office, Biden put emissions back under the spotlight by announcing the nation would rejoin the Paris climate agreement in February and directing federal agencies to revisit vehicle fuel economy and tailpipe pollution standards.

The president’s executive order directs the Department of Transportation and the EPA to reconsider the Trump administration’s 2019 decision to revoke California’s authority to restrict tailpipe emissions and set zero-emission vehicle mandates by this month. It also orders a review of fuel efficiency standards for light vehicles by July.

The Biden administration last week took a first step to no longer preventing states including California from setting regulations tougher than the national standard, with NHTSA proposing to withdraw its portions of the Trump-era rule.

In November, GM withdrew its support of the Trump administration in the California lawsuit. Three months later, the National Automobile Dealers Association and the remaining automakers — Stellantis, Hyundai, Kia, Mazda, Mitsubishi, Subaru and Toyota — also pulled out of the litigation.

Ford, BMW, Volkswagen, Volvo and Honda sided with California and finalized binding agreements with the state to meet stricter fuel economy and emissions standards through the 2026 model year than ones set by the Trump administration, which loosened standards put in place under former President Barack Obama.

“So far, so good, but where I see potential friction points down the road is it will be interesting to see what manufacturers and auto trade associations choose to do when Biden does roll out new fuel-efficiency standards,” said Amanda Shafer Berman, a partner in the environment and natural resources and litigation groups at Crowell & Moring’s Washington, D.C., office.

As for the administration, Shafer Berman expects it to take action in the “fairly near term” and publish new standards for the upcoming few model years through 2026, if not longer.

“That’s the point at which we’ll see if every manufacturer really supports the increased stringency of the standards,” she said.

Despite past differences among automakers, the industry has pledged to work with the Biden administration on establishing a revised national program that includes California as well as achieving net-zero carbon transportation and speeding the transition to electric vehicles.

The Alliance for Automotive Innovation — which represents the Detroit 3 as well as Toyota, Volkswagen and other major automakers — said it supports a program that achieves improvements in greenhouse gas emissions “roughly midway” between the Trump rules and those of the former Obama administration.

The Trump-era rules, which took effect last June, require 1.5 percent annual increases in vehicle fuel efficiency through 2026. Under Obama, emissions standards would have tightened by 5 percent each year.

The California framework meets automakers in the middle, requiring 3.7 percent annual increases.

Michael Hartrick, senior director of energy and environment at the alliance, said the industry is in a much more “proactive and future-looking state” now.

“People like to characterize these environmental issues as industry versus the environment. You have to pick and choose a winner,” he said during an Automotive Futures’ virtual conference on April 14. “I don’t think we’re really there anymore, especially from the auto industry perspective. We’re talking right now more about coordination and cooperation and a commitment to transition to net-zero emission vehicles.”

On the same day Biden signed an executive order to tighten existing “Buy American” provisions and boost government buying from U.S. manufacturers, he also vowed to replace the federal fleet of roughly 645,000 vehicles with electric models and create a million jobs in the auto industry.

“The federal government also owns an enormous fleet of vehicles, which we’re going to replace with clean, electric vehicles made right here in America by American workers, creating millions of jobs — a million auto worker jobs in clean energy — and vehicles that are net-zero emissions,” the president said at the signing.

Crowell & Moring’s Shafer Berman said the efforts could be “a huge potential boon” for U.S. manufacturers and suppliers, though details on specific actions to promote the order’s updated policies are still under review by agencies through July.

As the industry looks to Washington to accelerate and support the adoption of EVs, the government could be a “powerful market of first resort” that can help emerging industries achieve scale, according to Genevieve Cullen, president of the Electric Drive Transportation Association, a group that represents a broad swath of stakeholders in advancing electric-drive technology and electrified transportation.

The cross-industry trade association’s members include most automakers in the U.S. as well as energy companies and fast-charging provider EVgo.

“Obviously, vehicle procurement across the government, that’s not like throwing a light switch,” Cullen said.

“Agency needs and vehicle needs are pretty diverse, and making sure that the process works and the funds are there and helping the agencies … understand their options and have the infrastructure to charge those options — that’s going to be part of making that goal attainable.”

As for creating a million jobs in automotive — a pledge not tied to a time frame and with no specifics on what the president considers an auto job — if accomplished, said Jeff Ferry of the bipartisan Coalition for a Prosperous America, it would be “a great achievement.”

“For him to create a million jobs — doubling the size of the U.S. [auto] industry — that means you have to have some aggressive growth for U.S. automakers,” he said. “We haven’t seen policies that will achieve that.”

While the president’s vision may be an “admirable” one, the Center for Automotive Research’s Dziczek said it’s going to take a lot to get there.

As of February, U.S. motor vehicle manufacturing employment totaled 189,000, while about 561,000 worked in parts manufacturing, according to seasonally unadjusted data by the U.S. Bureau of Labor Statistics. About 157,000 made vehicle bodies and trailers, bringing the auto industry manufacturing total to roughly 907,000.

“It’s still a big, heavy lift to get to a million jobs — very ambitious,” she said, but “the global industry is moving quickly to electrification and, if we stood still, our market might be overrun by imports, so making a bet on having the U.S. have a stake in that is important.”

When the president ordered a review of potential weaknesses in U.S. supply chains in February, it drew closer attention to the global semiconductor shortage — a lingering and complicated issue that has disrupted auto production worldwide.

Biden’s executive order launched an immediate 100-day review of supply chains for four vital products — semiconductor chips, large-capacity batteries for EVs, rare-earth minerals and pharmaceuticals.

It also calls for an in-depth review of six industrial sectors including transportation, energy and communications technology within one year.

“We need to stop playing catch-up after the supply chain crisis hit,” he said at the signing. “We need to prevent the supply chain crisis from hitting in the first place.”

While the action was a first step by the administration to comprehensively identify risks in the nation’s critical supply chains and part of Biden’s commitment to accelerate U.S. leadership in clean energy by potentially expanding domestic production of those items, it doesn’t provide the auto industry with a quick or easy fix.

“ ’Chipageddon’ is the canary in the coal mine about supply chains,” said Robbie Diamond, CEO of Securing America’s Future Energy, a group committed to reducing the country’s reliance on oil. “It … shows that if one component is not available, it really shuts down and slows down the entire industry.”

A bipartisan group of lawmakers this month pledged support for Biden’s proposal to invest $50 billion in semiconductor manufacturing and research, as outlined in the bipartisan CHIPS for America Act and included in the president’s $2 trillion infrastructure plan.

The auto industry has asked the government to dedicate a portion of funding under the bill to auto sector needs.

“This is an issue that’s been talked about for several months now,” said Jennifer Safavian, CEO of Autos Drive America. “There is bipartisan support for it. The president supports it. There’s a need for it as well, so we definitely hope that Congress moves quickly to move this forward.”

Safavian’s group, which represents the U.S. operations of international automakers, has highlighted a need to keep the supply chains diversified, with multiple sourcing options in the U.S. and abroad.

“That will help ensure that there’s consistent and reliable access to supplies like semiconductor chips and that we have redundancy in the supply chain,” she said.

While Biden’s order aims to increase domestic sourcing of critical minerals such as rare earths as well as EV batteries and their components — a space dominated by China — significant logistical issues will need to be addressed first, according to Dan Kish, senior vice president of policy at the American Energy Alliance, a group that has lobbied against extending the federal EV tax credit.

“Even in those areas where China is not necessarily the source of these minerals, they still control the vast preponderance of the world’s processing of these things,” Kish said.

“It’s much easier to set up an automobile factory than it is to develop a mine or to develop the processing facilities because of the regulatory environment in the U.S.”

Ferry, of the Coalition for a Prosperous America, said addressing potential weaknesses in critical U.S. supply chains — as well as developing a domestic EV supply chain — is achievable, critical and “must be done.”

“We have a threat from China … and we have to respond,” he said.

Nearly three weeks after Biden signed the $1.9 trillion COVID-19 relief package, the president turned to economic recovery and unveiled the framework of a roughly $2 trillion infrastructure plan.

Biden’s proposal goes beyond fixing roads and bridges — it would mean investment of billions of dollars toward vehicle electrification and other initiatives to strengthen the U.S. economy, address climate change and create jobs.

The plan calls for $174 billion to boost EVs — including a reported $100 billion in consumer rebates and $15 billion to build 500,000 EV charging stations nationwide — as well as additional funding to incentivize domestic manufacturing and support R&D for batteries, semiconductors, rare-earth minerals and other critical technologies.

“What the Biden administration is looking to do is make a real, true, once-in-a-generation kind of investment in this technology — in both the infrastructure and the vehicles,” Atlas Public Policy’s Nigro said.

“That should be welcome to the industry because, to date, they haven’t had a strong enough partner in Washington to really hit the levels of adoption of EVs that we see in Europe and China.”

Nigro called the proposal “a great down payment” on putting the U.S. toward 100 percent electrification by 2035. But to get there, more than $87 billion in investments in charging infrastructure will be needed over the next decade, including $39 billion for public charging, he said, citing a recent analysis by the Washington-based policy and tech firm.

Despite increased investments in electrification by automakers, EVs account for only about 2 percent of the U.S. market, according to Akshay Singh, a partner at Strategy&, PwC’s strategic consulting arm.

“The question still remains what kind of returns they can generate in the short term,” he said.

While Biden’s American Jobs Plan sends a message to the industry that Washington will play a constructive role in building out EV infrastructure, prospects on how much of the plan make it into law are unclear, several industry experts said.

“Their size and scope is correct on what needs to happen,” said Diamond of Securing America’s Future Energy. “But the devil will be in the details that come out in Congress.”

To pay for it, Biden has proposed raising the corporate tax rate to 28 percent from 21 percent and enacting a 15 percent minimum tax on the income large corporations report to investors as well as other steps to reform the corporate tax code.

With a narrow Democratic majority, the plan as it stands won’t have an easy path in Congress, though the White House has said it is willing to compromise on aspects of the package — and how to pay for it.

“What’s frustrated Biden’s efforts to get bipartisan support is that he’s made the infrastructure bill so large and so broad … that it’s alienated some Republicans,” said Ferry of the Coalition for a Prosperous America.

Members of Biden’s own party also have offered their critique of the plan, with progressive House Democrats such as Alexandria Ocasio-Cortez of New York and Pramila Jayapal of Washington saying the overall package needs to be bigger.

The administration’s emphasis on greening the transportation system — as well as the electric system and grid — are also “hugely large lifts,” said the American Energy Alliance’s Kish.

“What surprises me is the sort of Field of Dreams approach that the industry seems willing to take on this, in the sense that ‘if we build it, they will come,’ ” he said.

The Alliance for Automotive Innovation’s Hartrick argues such a transformational change is unlikely to occur without a few hiccups, however, and that vehicles and infrastructure “must arrive together.”

“Many coordinating activities all have to happen together, and there’s a lot of moving pieces that, unless we fit the puzzle pieces together at the same time, don’t develop this comprehensive transformation that we’re looking for,” he said. “Thus, we need to have some flexibility.”

Biden has outlined a “worker-centered” trade policy agenda that seeks to restore U.S. leadership and relationships with its allies while also combating climate change, bolstering supply chains and ending unfair trade practices.

While the president’s agenda released in March prioritizes a review of trade policy regarding China, his administration has been tight-lipped for now on actions related to Trump-era tariffs.

“China has reduced tariffs, but we have not,” said Dziczek of CAR.

“The tariffs that are in place, I think Biden will be cautious to remove without extracting some kind of concession.”

Meanwhile, industry groups Autos Drive America and the American International Automobile Dealers Association have backed a coalition calling for the rollback of certain tariffs imposed by the Trump administration, including Section 232 tariffs on imported steel and aluminum and Section 301 tariffs on imports from China.

“Reestablishing relationships with our allies and trading partners and really looking for more of a multilateral approach is also very beneficial for the automotive sector,” said Autos Drive America’s Safavian.

Biden’s U.S. Trade Representative Katherine Tai — who was unanimously confirmed by the Senate last month and praised by GOP leader Mitch McConnell as “thoroughly qualified” to confront China — said in written responses to U.S. senators that the Biden administration is reviewing policies to respond to the nation’s unfair trade practices and that she intends to explore “every possible option available” to address intellectual property theft and inadequate market access.

As for Section 301 tariffs, Tai said she will “work with Congress to ensure that those tariffs are appropriately responsive to China’s practices, account for their impact on U.S. businesses, workers and consumers, and support the U.S. response to the COVID-19 pandemic.”

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