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Biden arrives at Detroit auto show with controversial electric car incentives

  • Post category:Economy News
  • Reading time:4 mins read

By pushing this summer for a massive semiconductor investment program and a major environmental and social reform plan that includes pursuing financial incentives for the purchase of emission-free vehicles, Joe Biden has scored some important victories at the approaching legislative elections in November.

The automotive sector, however, fears a backlash with the new formula subsidies, which can go up to 7,500 dollars: they are subject to several conditions aimed at guaranteeing that the vehicles are assembled in North America and that the batteries are manufactured with raw materials increasingly coming from the region.

The idea is to reduce the dependence of manufacturers on China and on a supply chain that can be disrupted at any time, such as at the height of the pandemic.

But manufacturers are not necessarily ready to offer vehicles that can claim full financial assistance.

“We’re going to see a slowdown in the growth rate,” predicts John Eichberger, executive director of the Fuels Institute, a research group funded by companies in the energy and transportation sectors.

“Missed Opportunity”

A car enthusiast, Joe Biden has already visited Ford and General Motors factories since his arrival at the White House.

He had included $7.5 billion in aid for the construction of electric charging stations in a major investment plan adopted at the end of 2021.

In August, the president pushed parliamentarians to vote for a law providing for 52 billion dollars to revive the production of semiconductors in the United States, components that have been sorely lacking in automakers since the beginning of 2021.

Then he promoted the “Inflation Reduction Act”, which includes new subsidies for the purchase of electric vehicles.

His visit to Detroit is meant to bring a welcome spotlight to a car show that had been sidelined for two years due to the Covid-19 pandemic.

Since the last edition in 2019, the three major Detroit-based manufacturers have announced tens of billions of dollars of investments in electrics to try to catch up with Tesla, still largely dominant in this segment.

Ford has been marketing a non-polluting version of its popular pick-up, the F150, since the spring.

General Motors again unveiled an electric SUV last Thursday with a base price of $30,000, supposed to attract a more modest clientele. On the same day, Stellantis (formerly Fiat-Chrysler) announced that it would launch four Jeep-branded SUVs in North America and Europe by 2025.

Sales of electric vehicles in the United States, for a long time lagging behind Europe in this segment, jumped 66% in the second quarter according to the firm Cox Automotive. They now represent 5.6% of vehicle sales.

However, manufacturers face several pitfalls, including the lack of lithium and other materials needed to design batteries, and prices that are still higher than traditional vehicles.

Government aid could therefore appear to be a boon.

“Unfortunately, the electric vehicle tax credit requirements will make most vehicles immediately ineligible for the incentive,” said John Bozzella, president of the Automotive Innovation Alliance.

“It’s a missed opportunity at a crucial time (for the industry) and a change that will surprise and disappoint customers looking for a new vehicle,” he added.

Manufacturers understand the value of sourcing as many raw materials as possible locally, notes Alan Amici, director of the Center for Automotive Research.

But reconfiguring supply chains takes time and “the industry still needs to find solutions,” he says.

Manufacturers still hope, he said, that Washington will show some flexibility in implementing the law.

If the texts are followed scrupulously, only three to five models could, certain years, be eligible for the aid of 7,500 dollars, advance John Eichberger.

Even as the transition to electric is just beginning, “it’s an additional obstacle on an already tortuous road,” he says.