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US transition to EVs will take new vehicles, expanded infrastructure, better supply chains

05 November 2021 Kevin Adler

Although new models of electric vehicles (EVs) get most of the attention in the shift away from the internal combustion engine (ICE), US auto and power industry members, politicians, and industry analysts said that there's much more to the equation.

Infrastructure, product supply chains, workforce development, consumer education, and affordability all must factor into the mix—and it's up to industry and government to work together to bring the future to reality, they said 3 November during the two-day Auto Innovation Summit by the Alliance for Automotive Innovation, the largest auto trade group in the US.

"This is an opportunity to reimagine transportation…. But we have to get this right," said Genevieve Cullen, president, Electric Drive Transportation Association, and moderator of a panel discussion on 4 November at the summit.

The Biden administration gave a positive jolt to the EV industry with the announcement in August of a goal that 40-50% of new light-duty vehicle sales in the US in 2030 will be zero-emission. "It was almost a transformative moment, when the president, the United Auto Workers, leaders of three automakers [Ford, GM, and Stellantis], and enviros all stood together with the same agreed-upon goal," said US Senator Debbie Dingell, Democrat-Michigan.

Biden also pledged that the federal government will help to install 500,000 EVs chargers nationwide by 2030.

Dingell said that the storms and record heat of the last two years have focused attention on climate change like never before. Given that vehicle transportation accounts for about 29% of annual US GHG emissions, "autos are right back at the center of the discussion ... on what could replace the internal combustion engine. There's never been a more critical time to invest in the auto industry and to explore policies to support the industry and its workers."

General Motors has made huge commitments to EVs, particularly battery EVs, said summit panelist Kristen Siemen, GM's chief sustainability officer. It's on track to spend $35 billion by 2025 to introduce 30 new EV models across all segments and price points around the world, she said. "We see a future when everybody will be in EVs, and for GM this means battery EVs," Siemen said on 3 November.

Butts in the seats

"It's all about getting the butts in the seats," said Lincoln Wood, electrification policy manager for utility Southern Co. "It works every single time. You get someone in an EV and they experience what driving one is like, and they're hooked."

Southern Co. has educational videos about EVs that it distributes online, and it's sponsored in-person events at which people can test-drive EVs and ask questions. One question he said he regularly gets is the cost of home charging, which Southern has estimated at $19-20 per month through a discount program it offers, which is far below the cost of car fill-ups with fuel.

In fact, a new study by Morgan Stanley, released on 3 November, said that rising gasoline prices this year has made the EV equation even more attractive. With US gas prices averaging $3.50/gallon nationally, and assuming an $8,000 price premium for an EV over an identical ICE model, someone driving 10,000 miles per year would recoup that cost in 7.3 years even without government purchasing incentives or considering lower maintenance costs.

However, getting a buyer over that hump of a higher initial price is a challenge, and that's why Dingell emphasized that federal and state governments have an important role to play in continuing to provide buyer tax credits.

The industry can solve some of that problem itself as it reduces costs of EVs. According to Morgan Stanley, when EVs that cost less than $20,000 are available, the market will be "substantial."

Part of the customer experience is understanding that "mobility means different things to different communities," added Terry Travis, a principal with industry consulting firm EVNoire. "We need to have discussions … [that include support for] privately owned vehicles, electric buses, shared vehicles, and so on," he said. "We have to create an ecosystem where the customer sees himself participating and benefiting."

And it's not just light-duty vehicles, Travis said. "You have to think across modes of transportation, looking at e-bikes to scooters, light-duty vehicles, to freight vehicles," he said.

Charging network

Charging stations are key to serving that broad ecosystem, so that consumers don't fear they are losing the convenience they've enjoyed with gasoline. As part of GM's investment in EVs, it's already funded installation of chargers on 50,000 miles of US highways, Siemen said, and it's making sure its dealerships have EV charging stations.

Southern Co. has to manage the new demand on its power network, said Wood. He gave an example of a warehouse that right now presents a modest power draw from its lighting and a heating/air conditioning system. "But what if [they] have 50 or 100 vehicles that have to be charged overnight?" Wood said. "We have to be able to provide that power."

On the home charging side, Southern provides incentives for charging at night, in order to balance its load, which tends to peak in the late afternoon, Wood said.

At the same time, Southern has joined the coalition of US utilities that are coordinating efforts to build a nationwide public charging network.

Given the challenges, IHS Markit says that EVs sales could be 25-40% of the new car market in 2050, shy of Biden's goal though but a huge step up from the most recently monthly figures of 4.5%. The sales level in 2030 "will be determined by whether the charging infrastructure is there and is grid ready for it," said IHS Markit Vice Chairman Daniel Yergin. "You have to take the supply chain much more seriously too. And public acceptance matters."

Countries where there's a greater political will or other factors influencing consumers' decisions are further on the path to EVs, Yergin said. For example, EVs are 14% of China's new car sales and have reached 20-21% in some Europe countries, he said.

Supply chains

As Yergin noted, the supply chain is a sensitive issue for automakers today, especially EV batteries and semiconductors. Dingell remarked that China has about 75% of the world's battery cell manufacturing capacity, and she called this "a national security issue" and the critical element determining how many EVs will be built in the US in the future.

Ford announced plans in September to build a battery research center in Michigan, complementing its new manufacturing centers in Tennessee and Kentucky that will produce electric F-Series trucks and the batteries for Fords and Lincolns. Between Ford and its partner, South Korean battery maker, SK Innovation, it's a $11.4.-billion investment.

Dingell believes the government can help on the supply chain end, and she's introduced a bill to make US Department of Energy funding available to retool auto factories for EVs and batteries. "Right now is when the critical decisions are being made about where and how electric vehicles will be built," she said. "We want to see them built here in America."

The government's support isn't in just the obvious area of EV batteries, said John Neuffer, president and CEO of the Semiconductor Industry Association. He noted that the FY2022 budget reconciliation bill and the infrastructure bill combined have $52 billion in potential funding that would support US semiconductor chip makers in research and development (R&D), materials sourcing, and other needs.

Even that isn't enough, he said at the auto summit. "It's a good first step … necessary to bring us up close to what other governments are doing," he said on 4 November. "We are going to need more measures in place … but at least we are finally heading in the right direction."

Outside of funding, the government is taking steps today to try to help address the supply chain, said Don Graves, deputy secretary, US Department of Commerce. "This is a crisis for the auto industry and every other industry across the country," he said.

The Commerce Department has set up new systems to provide early-warning information about a new outbreak of COVID-19 or a major storm could affect supply chains, he said. With this information, companies can speed up their reaction time to interruptions.

Longer-term, Commerce and other agencies can help chip manufacturers "make better investments, smarter investments," he said. Graves observed that the US does have a strong base of manufacturers of "legacy chips," as well as R&D on leading-edge chips, and that improving performance of legacy chips is valuable for the auto industry and across the economy.

At the same time, Neuffer observed that demand from the auto industry is pushing the chip industry to design a new generation of chips. If both legacy and new-generation chips are in production, Neuffer said "it would make [our supply chain] more resilient."

Huge opportunities

Done right, the EV revolution will create huge opportunities. A recent study from University of California-Berkeley cited by Travis estimates that the drive to reach Biden's 2030 EV goal will create 2 million jobs. Additionally, as ICE vehicles are removed from the road, the EV revolution will have positive public health implications, Travis said.

For General Motors, those types of multiplying benefits help it achieve the goals of its "Equitable Climate Transition," announced in June. This program includes a new $25-million Climate Equity Fund to help close equity gaps in the EV transition.

Robbie Diamond, president and CEO, Securing America's Future Energy (SAFE), a group working on the transition away from oil, said that building a strong, environmentally friendly supply chain is not only an opportunity for the US but an imperative. "If we do not create a race to the top, we will create a race to the bottom, and China will win," he said. "We need environmental standards, we need human rights standards, and we have to have transparency on the minerals all the way to the [Chinese] provinces."

The US missed a huge opportunity to compete with China in these emerging technologies when the US Senate failed to ratify participation in the Trans-Pacific Partnership (TPP) negotiated by President Obama, said Ellen Hughes-Cromwick, senior resident fellow at think tank Third Way. President Trump declined to revisit TPP participation, and as a result China is seeking to join the 11-nation pact, "which would be further to our disadvantage," she said.

When it comes to autos, batteries, and other key aspects of the energy transition, China is clearly going to be a concern for US industry and government, Yergin added. He contrasted the terms that the Obama administration used about "cooperation" and "engagement" with China, with the terms such as "rivalry" used by the Trump and Biden administrations as trade disputes and other conflicts have increased.

But with China's seeming lock on key materials—80% of global lithium ion, for example—and its stranglehold on key products too—about 80% of the world's solar panel manufacturing capacity—this rivalry is not going away, Yergin said.

For China, rapidly shifting to EVs is an imperative Yergin said. Leaving ICE engines behind will clean up urban air pollution and move it towards a lower-carbon future. It will reduce the need on imported oil, which supplies 75% of its demand. And it can "leapfrog" the US and Europe in a key technology area. "No question that's a very important part of their strategy," he said.

For those reasons, the US government should look at supporting the auto industry's transition as much for competitive reasons as for climate reasons, he said. "You have to look at this in the context of global competition," Yergin said, comparing it to other emerging fields. "When comes to science [and] to artificial intelligence, that rivalry is there now."

Posted 05 November 2021 by Kevin Adler, Chief Editor

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