The US has the most to gain in reducing transport emissions, but a series of federal policy rollbacks have put a dent in electric vehicle uptake. Even so, in the car market contraction induced by the coronavirus pandemic, sales of battery powered vehicles have proportionally suffered far less than sales of internal combustion engine competitors
LONG ROAD
EVs still only make up a small percentage of the US market as cultural scepticism, policy barriers and a broad preference for SUVs and pick-up trucks hold back growth
PLAYING CATCH-UP
The US market is expected to be proportionally larger than China by 2040 – though not as large as Europe – with EVs having reached a price parity with traditional internal combustion engine models
KEY QUOTE
“We are betting on [the] capitalistic powerhouse that is the US market to push EV adoption at a much quicker rate in the 2030s” Cars and the open road have long been fundamental to the American dream.
Transport has been the US’s single largest carbon-emitting sector since 2016 with more people turning to gas-guzzling Sports Utility Vehicles (SUVs) and even trucks. In 2019, transport was responsible for 29% of America’s emissions, a vast contribution. According to Climate Watch, a data platform, in 2016 transport was responsible for 1728.75 metric tonnes of carbon dioxide equivalents (MtCO₂e), putting the US in front of China at 781.36 MtCO₂e and the European Union at 789 MtCO₂e. The transition to a low-carbon economy requires the decarbonisation of transport, with growth of electric vehicles in the US’s major urban areas seen as an enabler. The IEA estimates the US cornered some 12% of the world market in 2019 of 7.2 million plug-in vehicles, despite fragmented policies to boost EV adoption. The sector is something of an enigma. Pro-EV policies are under attack, but the market is also synonymous with California-based Tesla. The pure-play EV maker turned an unexpected $16 million profit in the first quarter 2020 although it had factory shutdowns in the US and China because of the Covid-19 pandemic. Carmakers tend to lose money or break even on EV models, says Ram Chandrasekaran, a principal analyst for energy transition at consultancy Wood Mackenzie. Tesla has the largest US market share, at more than 60% followed by Nissan and GM with 16% and 8% of the market respectively.
POLICY SET-BACKS
Shortly after the pandemic hit, US President Donald Trump drastically cut ambitious Obama-era vehicle mileage standards. The Corporate Average Fuel Economy (CAFE) standard was reduced to a 1.5% year-over-year improvement in mileage for model years 2021-2026 against a 5% increase under the Obama Administration’s plan. The Trump administration says the lowering of the CAFE fuel efficiency standard, the single largest driver for EV sales, will lead to almost a billion more tons of GHGs emitted by 2025. Similarly, in September the Trump administration revoked a waiver allowing California to set its own exhaust pipe pollution standards. This could threaten California’s stringent and decades-old zero emissions vehicle (ZEV) standard, which forced automakers to sell EVs or buy credits from other automakers who sell more clean cars. Thirteen other states, including New York, follow California’s standards, which is home to half of the EVs in the US. The state has a goal of five million ZEVs on the road by 2030 and in 2019 bolstered its suite of EV policies by passing six EV-related bills. California – along with 22 other states and in some cases cities such as Washington DC, Los Angeles, and New York City – have countered Trump’s efforts to block tougher standards by filing federal lawsuits against his actions. The Alliance for Automotive Innovation, a trade group, has intervened in a litigation on behalf of the Trump administration over the roll back in CAFE standards, raising questions about some major carmakers’ commitment to a cleaner environment. The dispute is expected to be decided eventually by the US Supreme Court. Alliance members include General Motors, Fiat Chrysler Automobiles and Toyota Motor but not Ford Motor or Volkswagen. Research firm Rhodium Group found that rolling back national fuel economy standards and revoking California’s waiver could reduce the share of ZEVs sold in 2035 by up to 8% nationally, or up to 14 million fewer ZEVs on the road by that year. Wood Mackenzie has similarly reduced its projections for EV adoption in the US by 0.5-1% per year for the next five years. In December, the US Congress declined to extend a $7500 tax credit for purchases of electric vehicles. The credit phases out when an automaker has sold 200,000 EVs, as have GM and Tesla, and Nissan is close to hitting the ceiling. Britta Gross, managing director of the mobility practice at the Rocky Mountain Institute’s (RMI), an energy transition think-tank, notes the quota essentially punishes an automaker for selling more EVs.
KEY TO TRANSITION
Electrification of transport reinforces the energy transition, says Genevieve Cullen, president of the Electric Drive Transportation Association (EDTA). More renewable energy is being incorporated into the grid, while EV batteries could potentially also be used as storage units to help lessen the ripples of renewable energy supply. According to RMI, if the world’s electric grids were on a path to achieve 75–85% of clean energy production by 2040 then 15–20% of light-duty vehicles on the roads would need to be electrified by 2030 in order to limit temperature rise to less than 2°C. In the United States, this represents 40-50 million vehicles, says RMI’s Gross. For the energy transition to succeed through electrification, ramp-up of EV sales, or electrified public transport, will have to be steep. In America, battery plug-ins are still seen as a vehicle for the coastal elites such as California, known for liberal politics and interest in the environment. Analysis firm Wood Mackenzie projects EVs will be only 1.1% of vehicle sales in the US in 2020, compared with 5% of sales in China, 5.2% of sales in the EU and 0.9% globally. SUVs ON STEROIDS RULE America’s love affair with conventional internal combustion vehicles seems to be endless. Gas-guzzling SUVs are flying out of the showrooms and the single most popular new vehicle sold in the US is a pickup truck. In 2019, SUVs made up nearly 50% of new car sales in the US and 40% of the global total, according to the IEA. In a nod to this trend, GM unveiled an electric Humvee earlier this year, a futuristic version of the mammoth SUV on steroids that originated as a military vehicle, an irony given its hunger for power. Sales of ICE vehicles in the US are also bolstered by petrol subsidies. A litre of fuel in America can typically cost as little as a quarter as much as in the most heavily taxed western European countries.
In March, news service Reuters cited inside data from GM and Ford suggesting they will make more than five million SUVs and pick-up trucks in 2026 in North America, but only 320,000 EVs. That is about 5% of their vehicle production in the subcontinent, less than the nearly 368,000 that Tesla sold in 2019 and just four years shy of when RMI warns that one in five light-duty vehicles must be electric. A furore erupted in June when Mary Barra, GM’s CEO, told Bloomberg news service that not every car will be electric in 2040. “It will happen in a little bit longer period, but it will happen,” she said, a response that only fuelled the criticism that the sector is not taking EVs seriously enough. When questioned by journalists, Barra tried to clarify by saying GM expected continuing strong ICE sales in the middle of the country, with EV sales on the coasts being “additive”. Cullen from EDTA said the commitment of US vehicle manufacturers to advancing EVs can be seen in the investments made. “Follow the money. Look at where they are investing in RD&D (research, development and demonstration).” She notes that GM and Ford are investing billions of dollars in EVs. GM will spend $20 billion between now and 2025 on EV and automated vehicle development, Barra told participants at GM’s “EV Day” in March. The company will offer 20 new models of EVs by 2023 in the US and China, hoping to sell one million EVs a year until 2025. A new car model can cost an automaker $0.5 billion in investment, says RMI’s Gross.
BALANCE SHIFTING
Sales of all road vehicles in car-loving America have decreased because of the pandemic but far less so for EVs, despite plummeting fuel prices. Vehicle sales in the US were down 12% in the first quarter, but EVs only saw a 0.8% drop off, according to Jonathan Levy at EVgo, America’s largest fast charging network and which uses only renewable energy. EV makers, however, are reacting to both the Covid-19 recession and changes in policy with caution, postponing new models across the board, says Ryan Fisher, advanced transport associate at BloombergNEF, a research service. He notes that while Ford is launching the Mustang Mach-E in its domestic market first, Mercedes and BMW have delayed EV launches in the US. “They are prioritising supplies for markets such as the EU and China. This will be down to a mix of consumer demand, emissions regulations and potential fines,” he says. EV sales in the US are expected to gain ground over the longer-term compared with the other major markets, according to Wood Mackenzie. By 2025, the consultancy predicts that US EV sales will be 5.3% of total vehicle sales, compared with China’s 11%, the EU’s 10.5% and global sales of 3.3%. By 2030, however, the consultancy projects that EV sales in the US and China will be 16% of the total while the EU will be at 45.8% and the world will be 7.5%; by 2040, US sales will be 49%, China 40%, the EU 60% and global sales will be 27%. Uptake will be boosted as a tipping-point is reached, perhaps by the mid-2020s, whereby electric vehicles cost the same to buy as their conventional counterparts, says WoodMac’s Chandrasekaran. This is also when 4% of vehicles on the roads in the US are predicted to be electric, meaning that many people will own or know someone who owns an EV, allowing consumers to become less anxious with the prospect of a new sort of vehicle, he says, which is a current barrier to growth. Sales of battery plug-in vehicles gain ground in the US by the 2030s because EVs will be economically feasible without policy support and because of the per capita spending power of the US. “We are betting on [the] capitalistic powerhouse that is the US market to push EV adoption at a much quicker rate in the 2030s,” Chandrasekaran says. Automakers still make more of a profit on ICE vehicles than their often smaller electric counterparts, primarily because battery prices are higher than a traditional vehicle powertrain, even if long-term operation and maintenance is cheaper for EVs. Battery prices are continuing to plummet, having already dropped from $800 to $145/kWh since 2010, according to BloombergNEF. EV mileage ranges are also increasing. The Tesla Model S “long range plus” variant has an official range of 402 miles on a single charge. Charging infrastructure is getting denser too. Some 80% of charging in the US is done at home. EVGo also says that 115 million Americans live within 15 minutes of one of its fast-chargers. In the US, infrastructure is typically privately funded, whereas in China or the EU, far more investment in infrastructure is public.
ACCELERATING ADOPTION
The US is clearly not yet on a path to fulfil RMI’s scenario for 15-20% of vehicles on the road to be battery plug-ins by 2030. That would mean 50 million EVs in 2030, requiring a 39% year-on-year growth in sales, says RMI. If sales only increase by 11.5% year on year through 2024, the US will need a 64% year-on-year sales growth through 2030, says the think-tank’s Gross. Various ways of boosting EV adoption are being debated in Washington DC, including in stimulus legislation. “We have an opportunity in the US to be economically stimulative and environmentally beneficial,” stresses EVGo’s Levy. A $1.5 trillion infrastructure bill being marked up in Congress in the third week of June included a substantial investment in EV infrastructure, notes Cullen. It is expected to be debated in early July. A bill led by Californian lawmaker Jackie Speier called for point-of-sale tax credits of $15,000 for new EVs costing $35,000 or less and of $7500 for more costly vehicles, plus a new $5000 tax credit for used EVs. It would also provide incentives for fast-charging stations, low-interest bonds for domestic battery manufacture and a tax credit for EV owners if their vehicle’s battery is made in the US. The World Resources Institute’s Ryan Sclar advocates means-tested subsidies to influence the purchase decision, whether for medium- to low-income private buyers or a cash-strapped transit agency. “I remain hopeful that if we can just convince one in five of our friends to make the switch soon, we can reach the critical climate targets,” RMI’s Gross says, conceding that the prospect is challenging. “But every year we delay, our challenge becomes that much more difficult,” she concludes.
TEXT Ros Davidson