How Biden’s E.V. Plan Could Help Tesla and Squeeze Toyota
A push to increase sales of electric vehicles favors companies that already have all-electric cars on the market and could penalize those that don’t.,
How Biden’s E.V. Plan Could Help Tesla and Squeeze Toyota
A push to increase sales of electric vehicles favors companies that already have all-electric cars on the market and could penalize those that don’t.
The Biden administration’s vow on Thursday to push sales of electric vehicles to 50 percent of new car purchases by 2030 means that there’s no place left to hide for any carmaker resisting the shift to battery power.
Europe and China were already heavily promoting electric vehicles using regulations, incentives for consumers, and subsidies for carmakers and battery producers. President Biden’s commitment to follow a similar strategy means that the world’s three largest car markets are moving away from internal combustion at a faster pace than anyone predicted a few years ago.
“This is the last major piece in the jigsaw,” said Peter Wells, director of the Center for Automotive Industry Research at Cardiff Business School in Wales. “This does put pressure on some of the more laggardly companies.”
Mr. Biden’s announcement is good news for Tesla, which accounts for more than two-thirds of the battery-powered cars sold in the United States, and potentially bad news for Toyota Motor, the world’s largest automaker, which will not begin selling a car powered solely by batteries in the United States until next year.
In between are General Motors, Ford Motor and Volkswagen, which have begun selling tens of thousands of electric cars but depend on vehicles with internal combustion engines for most of their revenue and profit.
It is by no means certain that the familiar car brands will be dividing the expanding market for electric vehicles among themselves. The shift to battery power is an opportunity for Chinese carmakers to expand into new markets, which they are doing with strong support from their government. NIO, for example, has announced plans to open a dealership in Oslo in September as a first step into the European market.
The president’s declaration could also help start-ups like Rivian and Lucid Motors, both based in the United States, that are expected to deliver their first vehicles this year.
Mr. Biden framed his push in part as a geopolitical competition in an emerging technology. The initiative is part of an effort “to drive the electric vehicle future forward, outcompete China and tackle the climate crisis,” according to a White House fact sheet.
Europe is also far ahead of the United States in E.V. sales. The European Commission, the administrative arm of the European Union, has effectively compelled the auto industry to sell electric cars by imposing stiff fines on companies that exceed limits on carbon dioxide emissions.
Governments in Germany and other European countries are also offering generous cash incentives for electric car purchases. And an increasing number of consumers like the smooth, quick acceleration of electric vehicles, the savings on fuel and maintenance, and the satisfaction of not producing any tailpipe emissions.
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In the first six months of the year, 17 percent of the new cars sold in Europe were battery-powered vehicles or plug-in hybrids, according to Schmidt Automotive Research, which tracks E.V. sales in Europe. In the United States, fewer than 4 percent of new cars were pure-electric vehicles or plug-in hybrids, according to June sales figures compiled by Argonne National Laboratory.
The European Commission continues to turn up the pressure, announcing plans to effectively ban sales of cars with internal combustion engines in 2035.
By comparison, the Biden administration’s goals are modest, which has earned it criticism from some environmentalists. Plug-in hybrids, which have internal combustion engines in addition to batteries, would count as electric vehicles, giving Toyota some breathing room because of its leadership in that technology. And in 2030 half of the vehicles sold in the United States would still be powered by gasoline or diesel. Because cars typically stay on the road for more than a decade, that means the country will probably not be rid of internal combustion vehicles or gas stations for many years.
The White House’s caution may reflect recognition of the scale of the industrial transformation that lies ahead. The president’s plan also calls for construction of a nationwide network of charging stations and money to help companies retool factories to produce electric cars and components. One major risk is economic dislocation and job losses if the businesses that make parts for gasoline vehicles can’t adapt.
The opening ceremony for Zeekr, an electric vehicle brand, in Hangzhou Bay, China. The shift to battery power is an opportunity for Chinese carmakers to move outside their domestic market.Credit…Lorenz Huber for The New York Times
America also lacks enough battery factories. The European Commission is providing financial support to build battery factories in the European Union to reduce its reliance on Asia, where most batteries are currently produced.
Automakers expect the government to provide substantial help.
“Federal and state governments — and all stakeholders — will need to provide significant support for consumers, infrastructure and innovation,” the Alliance for Automotive Innovation, an industry group, said in a statement.
The U.S. government has previously played a critical role in kicking off the transition to electric vehicles. In January 2010, the Obama administration granted Tesla a $465 million loan to help the company develop and manufacture its Model S sedan.
“Without that $465 million, the Model S would have never happened,” Peter Rawlinson, who was chief engineer for that car and is now the chief executive of Lucid, said in an interview in June. “Tesla probably wouldn’t exist today. Really, the U.S. government made Tesla the success that it is today. That is a hell of an achievement.”
Companies that are already building electric cars in significant numbers have an advantage, Mr. Wells of Cardiff Business School said, because they have collected years of data on how owners use those vehicles. That includes not only Tesla but Nissan, whose battery-powered Leaf has been on the market for more than a decade, and G.M., which introduced the Bolt in 2016 and made the EV1 back in 1996.
G.M. is building two battery plants in the United States and has said it aims to phase out production of gasoline-powered vehicles by 2035. The company says it will spend $35 billion in the five years ending in 2025 to develop electric models.
“We are very committed to reducing greenhouse gas emissions and moving to an all-electric future as soon as possible,” the company’s chief executive, Mary T. Barra, said on Wednesday.
Ford this year started selling an electric sport utility vehicle, the Mustang Mach-E, which has done well and been praised by critics. It plans to add an electric Transit van this year and an electric F-150 pickup truck next year.
Companies that have been slower, like Stellantis, which owns Ram, Jeep and Chrysler, brands that do not yet have vehicles solely powered by batteries, face additional pressure to catch up. Jeep started selling a plug-in hybrid version of its popular Wrangler this year and plans to start selling fully electric vehicles by 2023.
“Automotive industry leaders have seen the writing on the wall for some time now when it comes to electrification and autonomous technologies,” said Jessica Caldwell, a senior analyst at Edmunds, a market researcher.
Ms. Caldwell added that the sales targets set by the Biden administration and the automakers “are certainly not unreasonable, and most likely achievable by 2030 given that automakers have already baked in large numbers of electric vehicles into their future product cycles.”
But many automakers are just beginning to bring electric vehicles to market that have been designed from the ground up to run on batteries. The Mercedes-Benz EQS, a luxury electric sedan, will go on sale in the United States this month. BMW began selling a battery-powered vehicle, the i3, eight years ago but was slow to follow up. The iX, an electric S.U.V., will arrive at American dealers early next year.
And just because companies make electric vehicles does not mean that people will buy them. Volkswagen began selling an electric S.U.V., the ID.4, this year, but sales in the United States so far have been only a fraction of the company’s established models like the Jetta or Tiguan.
By setting a clear target for electric vehicle sales, Mr. Biden is adding momentum to the shift to clean transportation, but he is also unleashing forces that automakers may not be able to control.
Consumers could stampede to electric vehicles as they become less expensive and people realize that gasoline vehicles are in danger of becoming white elephants with plunging resale value. That would strain companies that, with the exception of Tesla and some start-ups, are still mainly in the business of producing cars with internal combustion engines.
“The industry may lose control of this transition,” Mr. Wells said, “and it could be a volatile period.”