General Motors Co. Chief Executive Officer Mary Barra just stepped on the electric car’s accelerator. Call it the Biden effect.
Six months ago, the automaker backed the Trump administration in a legal battle that could castrate California’s long-standing right to enact its own stricter carbon emissions regulations. About two weeks after Trump lost, GM withdrew from that fight and two weeks after he left office, it pledged to comply with state mandate to sell only electric vehicles from 2035 – and to do so across the US
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Why the 180? Barra gets a jump on President Joe Biden’s policy, which is expected to help GM and its rivals build and sell more electric vehicles in the U.S. He wants to restore the $ 7,500 tax breaks that companies including GM and Tesla Inc. has been depleted under Trump’s supervision, and Biden plans to build 500,000 charging stations across the country. That could make EVs more affordable and alleviate potential buyers’ concerns about battery range.
Some see GM’s turnaround on clean car politics not as a calculated policy move, but as a recognition of the longer-term global forces.
“They wouldn’t make such a substantial announcement for political purposes only,” said Joe Britton, executive director of the Zero Emission Transportation Association, a Washington-based lobby group pushing for full adoption of electric vehicles by 2030. “This is a clear sign that electric vehicles will be the future and that we are now in a strong market for innovation. “
Believe it or not, in some neighborhoods of Detroit, Biden’s position was received with a sigh of relief. The rest of the world is moving towards electric vehicles, and the Trump administration had no interest in facilitating that transition in the US
Behind China, EU
While Trump sought to extend the era of the gas guzzler by watering down clean air rules and opposing efforts to expand electric vehicle tax credits, the Chinese government has passed rules and incentives that push up sales of electric cars. boosted the world’s largest car market. Nearly all 27 Member States of the European Union have purchase or tax benefits for consumers who buy electric vehicles, and it accelerates emissions restrictions to penalize car manufacturers for not selling enough electric vehicles in Europe.
As a result, China and the EU have leaped far ahead of the US in terms of electric vehicle adoption rates. Last year, of the 3.2 million electric vehicles sold worldwide, 1.3 million were in China and 1.2 million in the European Union and the UK. According to Swedish researcher EV Volumes.com, the US accounted for only 328,000 sales.
Playing catch up
China and Europe are far ahead of the US when it comes to electric transport
Source: BloombergNEF
That put the Detroit auto makers in one place. They make most of their earnings and profits at home in the US, where electric car sales were minimal. And they need help with economies of scale enough to reduce battery costs and create profit margins.
Barra had been moving in this direction since 2017, when GM announced plans to build 20 different EVs by 2023, but most were headed to the Chinese market. GM accelerated that shift in November and pledged 30 models by 2025 and a $ 27 billion investment in electric and self-driving cars with more models planned for the US Ford Motor Co. has also stepped up its efforts by allocating $ 11 billion for electric vehicles and more fuel-efficient vehicles.
Biden’s win sparked some wind in the auto industry and makes the commitment to electric powertrains more palatable for their risk-averse corporate culture.
Read more: Canada’s EV agenda gets a boost as the US, Detroit Pivot From Trump
Political convenience
Yet there is also a good dose of political convenience involved in the decision to go all-in on electric vehicles. GM, Toyota Motor Corp. and Fiat Chrysler Automobiles NV – now part of Stellantis NV – Teamed up with Trump in his California legal battle, throwing a bone at one temperamental president, expanding their ability to churn money-cow-gas-eaters.
Officially, GM said it always wanted one national standard instead of different Washington and Sacramento rules. Coincidentally, the company chose Trump’s watered-down option.
Critics of government subsidies were quick to see GM’s move as a sign that the electric vehicle market is maturing fast enough that no additional incentives are needed.
“GM is a public company and is making a strategic, calculated market decision,” Tom Pyle, former Trump adviser and current president of the American Energy Alliance, a free-market advocacy group, said in a statement. “In no way should a taxpayer be responsible for GM’s ability to meet – or fail to achieve – their corporate target of an all-electric light fleet by 2035.”
Large corporations have long sought to present themselves in the best light in Washington, regardless of the party’s candidate in the Oval Office. Car manufacturers are no exception. Mark Fields, the former CEO of Ford, warned then-President Trump that overly strict mileage rules would create a million jobs in danger, a prelude to Trump’s rollback. And GM broadly praised its Chevrolet Volt plug-in after its 2009 bailout by the Obama administration, which later set a target of having one million electric vehicles on the road by 2015.
Carrot and stick
Trump and his Twitter account have now been silenced. With Democrats running the White House and having a majority in both chambers of Congress, the prevailing wind is definitely blowing against Detroit’s status quo reliance on large SUVs and trucks.
Biden’s plan also comes with a stick. Earlier this week, he has pledged to restore emission standards for vehicles stripped by the Trump administration and “set new, ambitious standards that our workers are willing to meet.”
Read more: Biden’s Buy-America Dream is based on buying electric cars that no one makes
This would support GM’s electrification push and could encourage competitors to follow suit, said Joshua Linn, a senior fellow at Resources for the Future, a Washington think tank focused on environmental policy and economics.
“Companies don’t want to be too far ahead of the market,” he said. “With more ambitious policies, greenhouse gas standards and perhaps a national zero-emission vehicle program will help support the entire market moving in that direction.”
GM’s worst nightmare is a scenario where its commitment to electric vehicles fails to meet increased consumer demand, allowing rivals with less ambitious electrification plans to steal business. Biden may be giving GM some of the coverage it needs to keep going.
– With help from Will Mathis and Jennifer A Dlouhy