President Biden’s signature climate law has spurred a significant increase in investments in electric vehicle production across the United States. This has included the investment of billions of dollars in battery plants in the Southern region, along with the establishment of new assembly lines around the Great Lakes area. So far, early evidence suggests that it is achieving a goal that economists have historically considered challenging and expensive: using government influence to rapidly develop a new industry.
This growth is particularly important for accelerating the adoption of electric vehicles by consumers. The law directly ties the future affordability of electric vehicles to automakers’ commitment to source and manufacture them within the United States. Currently, the climate law has not had a particularly significant impact on electric vehicle sales. However, Americans are expected to purchase one million electric cars and trucks for the first time this year, continuing the upward trend in market share for electric vehicles established over the past few years.
One of the unintended impacts of the law on the consumer market has been an increase in leasing of electric vehicles, as a Treasury Department regulation allows dealers to bypass the law’s domestic production requirements when it comes to lease vehicles. Understanding the implications of these regulations, experts believe that electric vehicle sales are projected to rise significantly if certain conditions are met.
One of the conditions highlighted by experts is continued investment in battery and assembly plants by automakers. Additionally, the administration must further facilitate the deployment of charging stations to improve the overall electric vehicle ownership experience.
President Biden aims to revitalize the electric vehicle market amidst a global shift towards cleaner fuels, which is occurring faster than anticipated. This shift includes the widespread adoption of electric vehicles as a means to reduce emissions in the transportation sector, which is the largest emitter of greenhouse gases in the U.S. economy. The execution of government policies to support electric vehicles is crucial for ensuring that the market continues to grow and doesn’t stagnate.
Furthermore, these policies look to create middle-class jobs in the auto industry. The key to success lies in ensuring that automakers adhere to the manufacturing requirements set forth in the climate law, which in turn can lead to the electric vehicle industry dominating the U.S. auto market. Critical to this relationship is cost, as electric vehicles need to have a domestically-sourced supply chain to qualify for the full $7,500 consumer tax credit.
The climate law has incentivized investment from U.S. companies, particularly in electric vehicle production and advanced battery component parts. Consumers also stand to gain from generous tax credits for buying electric vehicles. However, the law’s stringent content and sourcing standards have had mixed effects on automakers and leasing trends in the electric vehicle market. Nevertheless, experts are optimistic about the potential for electric vehicle sales, especially with the right investment and support from the government.
