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U.S. President Joe Biden Aims for 50% of New Vehicles Sales in the U.S. be Electrified by 2030

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【Summary】The U.S. auto industry has gotten its biggest endorsement yet for building more fully-electric vehicles. President Joe Biden is set to sign an executive order on Thursday aimed at making half of all vehicles sold in the U.S. be low-emissions and electrified by 2030. In addition, Biden will propose new emission rules through 2026 for automakers.

Eric Walz    Aug 05, 2021 10:00 AM PT
U.S. President Joe Biden Aims for 50% of New Vehicles Sales in the U.S. be Electrified by 2030

The U.S. auto industry has gotten its biggest endorsement yet for building more fully-electric vehicles. President Joe Biden is set to sign an executive order on Thursday aimed at making half of all vehicles sold in the U.S. low emissions or electrified by 2030. In addition, Biden will propose new emission rules through 2026 for automakers.

Biden's 50% goal includes fully-electric, fuel cell and hybrid vehicles equipped with smaller combustion engines. 

Biden's bold plan won the support of major U.S. and foreign automakers, but the transition will require massive investments on both sides, as well as full government support to help automakers ramp up electric vehicle production, which would need to increase significantly.

Electric vehicle sales in the U.S. account for roughly 2% of all new cars sales, so it would be a major effort by automakers to bring that closer to 50%. 

The U.S. trails 20 other countries around the world in EV adoption, according to data from Pew Research. Germany, France, Sweden and Switzerland for example, have EV adoption rates ranging from 13% to 33% Norway has the world's highest EV adoption rate with nearly 75% of all new vehicle sales being electric. In second place is Iceland, with EVs making up just over 52% of all new vehicle sales. 

"We have got to act," U.S. Transportation Secretary Pete Buttigieg said in a CNBC interview. "This goal of getting half of our new vehicles to be electric within the decade is going to be urgently needed for us to meet the imperative of climate in our time."

General Motors Ford Motor Co and Chrysler-parent Stellantis released a joint statement saying the companies aspired "to achieve sales of 40-50% of annual U.S. volumes of electric vehicles by 2030." Reuters first reported the planned automaker announcement on Tuesday.

Biden declined to set a binding requirement for EV adoption or to follow California and some countries in setting 2035 as a date to phase out the sale of new gasoline-powered light duty vehicles.

California Governor Gavin Newsom signed an executive order last year that aims to ban the sales of new combustion engine vehicles in the state by 2035 in an effort to reduce pollution and fight climate change.

There is also some resistance from the United Auto Workers (UAW) union, which represents the factory workers of General Motors, Ford and Stellatis. The UAW is worried that the switch to building EVs, which have far less parts than gas-powered vehicles, will result in job cuts at assembly plants.

UAW President Ray Curry noted the EV goal but said it was focused "on preserving the wages and benefits that have been the heart and soul of the American middle class."

Biden's new executive order also lays out a timeline for developing new emissions standards through at least 2030 for light duty vehicles and as early as 2027 for larger vehicles.

Biden will likely be criticized for not doing enough to fight climate change as the goals are voluntary. For automakers, the pledge to produce 40 to 50% lower emissions vehicles is not a requirement.

Dan Becker, director of the Safe Climate Transport Campaign, told Reuters that the plan "relies on unenforceable voluntary commitments from unreliable car makers... Voluntary pledges by auto companies make a New Year's weight-loss resolution look like a legally binding contract."

Biden plans a White House event with automakers on Thursday. It was not immediately clear which automakers would attend the event. 

Surprisingly, California automaker Tesla Inc., which is the world's most valuable car company and largely responsible for the increase in EV adoption around the world, was apparently not invited to the White House on Thursday.

Tesla Chief Executive Elon Musk took to social media and tweeted early Thursday, "Seems odd that Tesla wasn't invited."

Secretary Buttigieg was asked about Tesla's invite on an appearance on CNBC. Although he had no direct comment on why Tesla was not invited, he said that the EV goals are "focused on the entire market."

Overseas automakers building vehicles in the U.S., including Toyota and Hyundai Motor Co., also support the plan.

"You can count on Toyota to do our part. This is great for the environment and helps protect the 436,000 American jobs of our employees, dealers, suppliers and other stakeholders in the U.S.," said Ted Ogawa, CEO, Toyota Motor North America.

U.S. regulators also plan to revise former President Donald Trump's March 2020 rollback of fuel economy standards, which undercut the previous Obama era plan that required automakers to improve average fuel efficiency of cars by 5% each year, and 3.5% for SUVs and light trucks beginning in 2021. 

The former administrations's rollback lowered that to just 1.5% per year between model years 2021 and 2026, resulting in a fuel economy improvement by automakers of 7.5% by 2026. 23 states, four cities, and the District of Columbia have filed a lawsuit over the rollback of fuel economy regulations.

Trump's plan required 1.5% annual fuel economy increases of just 1.5% through 2026, well below the 5% yearly boosts set in 2012 by the former Obama administration.

Biden's proposed rules, which cover passenger vehicles built between 2023-2026, are expected to be similar in overall vehicle emissions reductions to California's 2019 deal with some automakers that aims to improve fuel economy 3.7% annually through 2026, sources told Reuters.

The new standards would be "ambitious, aggressive but they're also feasible," Buttigieg told CNBC, but gave no other details.

European automakers Volkswagen Volvo Cars said in a joint statement they support the Biden administration's electric vehicle plan, but that the federal government must take "bold action to build consumer demand."

The Detroit "big three" automakers, General Motors, Ford and Chrysler parent Stellantis, said the aggressive EV sales goals can only be met with billions of dollars in government incentives and consumer subsidies such as tax credits to help offset the higher cost of EVs. 

In addition, the plan would require major investments to build more EV charging infrastructure in the U.S., as well as investments in R&D and additional incentives to expand the electric vehicle manufacturing and supply chains in the United States.

Biden has called for $174 billion in government spending to boost EVs, including $100 billion in consumer incentives. A bipartisan Senate infrastructure bill includes $7.5 billion for EV charging stations but no money for new consumer incentives, such as expanding the federal EV tax credit of up to $7,500 on the purchase of an electric vehicle.

In May, the Senate Finance Committee advanced legislation for the "Clean Energy for America Act", which includes a proposed increase to the current federal EV tax credit of up to $7,500 on the purchase of a zero emissions electric vehicle.

The "Clean Energy for America'' bill, which advanced on a 14-14 tie vote, would eliminate the existing EV cap of 200,000 vehicles per manufacturer, which GM has already surpassed and is no longer eligible for. The credit would phase-out over three years once 50% of U.S. passenger vehicle sales were EVs.

However, the bill strongly favors GM, Ford and Stellantis. For automakers that do not employ UAW workers or build their EVs overseas for export to the U.S., would receive smaller tax credits. These companies include Tesla, Audi, Volkswagen, Hyundai and others. 

GM's own electrification plans are in line with Biden's proposal. The automaker announced in June that its increasing its investments in electrification and autonomous driving technologies to $35 billion through 2025, as it plans for an all-electric future with dozens of new battery-powered models in the works, many with autonomous driving capability.

"GM is targeting annual global EV sales of more than 1 million by 2025, and we are increasing our investment to scale faster because we see momentum building in the United States for electrification, along with customer demand for our product portfolio," said GM CEO Mary Barra in a statement.

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