The Biden Administration announced it’s plan to create a domestic supply chain for Electric Vehicles. Through the use of various tax credit incentives, they hope to scale up domestic battery manufacture. The tax credits themselves are four times bigger than what Congress’ budget experts anticipated. The aim, of course, is to lessen America’s dependence on foreign states such as China for manufacturing electric vehicle batteries as well as on fossil fuel in general as we move to a cleaner energy future.
The Inflation Reduction Act, passed last year, contained many bonuses and incentives to entice automakers and consumers to embrace more electric vehicles. One such incentive gives battery manufacturers a tax credit of $35 per kilowatt-hour for each cell made in the United States, effectively slashing production costs by a third. When the bill was being debated, the Congressional Budget Office had projected the credits would add up to approximately 30.6 billion over 10 years. However, thanks to the creation of new battery plants across the country, the actual total is most likely to be higher.
This stands to be big for automakers and should they (emphasis on *should*) pass these savings on to consumers, it could drive down the cost of new cars and increase sales. This remains to be seen. At the moment, Tesla expects to earn up to a billion dollars in tax credits. Other automakers expect to reap the benefits such as Ford and GM as they continue joint ventures with Korean companies, LG innovation and SK energy.
There’s something rather optimistic about how this all plays out. I think I’m immediately suspicious that the tax incentives will, heh, incentivize automakers to actually drive down the real cost to consumers. But then, I’m of cynical bent anyways. I *like* the idea of a shift away from fossil fuel based vehicles, but there are externalities to our energy problem not solved just by shifting all vehicles to electric. It helps, to be certain, but some of the real costs come from how very big the United States is and how much we need to transport good from one place to another. Also, I think that the creation of a domestic supply chain for electric vehicles begs the question of where we get the materials whatever rare earth metals are necessary to produce those batteries. If we were relying on China before, then I’d imagine that either we’ve secured our own supplies across the world, or we go into direct conflict with other countries over those resources. We lost a lot of time in that regard during the Gasleak Administration.
Who’s to say? There’s lots of good to the idea of getting automakers more on board with electric but there’s lots to be concerned about. Our move to a cleaner future needs to be a holistic one and it can’t be solved by just paying down the costs to manufacturers.
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