Weekly Brief: US Energy Bill Hopes to Super-Charge EV Revolution
A landmark, $430Bn climate and energy bill is headed to President Joe Biden’s desk this week.
His signature is a formality on what is designed to be a huge boost to the green economy, injecting billions of dollars of federal capital into industries like renewable energy and electric vehicles. The final package solidifies a $7,500 federal tax credit for EVs no matter the automaker, even those that have surpassed the 200,000-vehicle threshold. That’s a big win for the likes of Tesla, General Motors and Toyota. On the other hand, the bill introduces a number of stipulations that auto industry representatives argue will put a damper on future EV sales. The federal tax credits will only apply if vehicles and their batteries are mostly made in America. Electric sedans can’t cost more than $55,000 to qualify for the tax credit, electric SUVs can’t cost more than $80,000 and buyers can’t make an annual salary more than $150,000 filing singly or $300,000 filing jointly. For more on the particulars of the bill, see my previous coverage.
This may not prove to be the champagne-popping moment the auto industry thought it would be at first blush but it is, nonetheless, a positive result for EVs and will push the automotive sector to expedite its transition to a cleaner, quieter, carbon-neutral agenda.
Last week Ford got out in front of the moment when it announced the largest purchase of renewable energy from a utility in US history. As part of the new agreement, DTE Energy will add 650 megawatts of new solar energy capacity in Michigan for Ford by 2025. According to data collected by the Solar Energy Industries Association, once installed, the arrays will increase the total amount of installed solar energy in Michigan by nearly 70% and will allow Ford to attribute all its electricity supply in Michigan to clean energy, a major step toward its goal of reaching carbon neutrality.
“This unprecedented agreement is all about a greener and brighter future for Ford and for Michigan,” said Jim Farley, president and CEO of Ford. “Today is an example of what it looks like to lead; to turn talk into action.” Ten years ago this would have sounded like greenwashing coming from an auto executive’s mouth; now, it sounds like good business. Ford expects its compound annual growth rate for EVs to top 90% through 2026. That’s more than double what’s forecasted for global industry EV growth, in large part because of the early success of its all-electric Ford F-150 Lightning pickup truck. Ford is outselling Rivian despite the start-up’s six-month head start in the electric pickup market and it’s outselling Tesla because Tesla still hasn’t taken its Cybertruck to market and probably won’t for at least another year. “Take that Elon Musk,” said Farley at his press conference last week.
It will be interesting to watch which other automakers try to seize this moment in the American market, now that the federal government has tipped the playing field so strongly in favor of EVs. Volkswagen is a tempting choice. No other legacy automaker committed as quickly or completely to the goal of turning itself into an EV powerhouse. VW already stands in the number two slot for overall EV sales in Europe behind Tesla and its flagship ID.4 is in production in the US and set to go on sale this autumn.
All of these accomplishments belong to Herbert Diess’s strategic vision – a vision that is now up in the air given Diess’s sudden departure. The Porsche family made it clear last week that it is eager to keep a tighter control over VW in the future, hence the reason it appointed Porsche’s current CEO Oliver Blume into Diess’s role. Word has it that the reason Diess lost his job was not just because of his abrasive, bullish push toward EVs but also owing to a string of damning mishaps with VW software that led to costly delays for the ID.4, the all-electric Macan Porsche and Audi’s new line of Artemis EVs. Perhaps Diess’s departure will clear up some of this dysfunction and vault VW into pole position in the US alongside Tesla. Or it could do the opposite.
