2 reports highlight why U.S. lags on EVs

Source: By David Ferris, E&E News reporter • Posted: Thursday, February 27, 2020

America’s confused policies on clean transportation are a chief reason why the country is selling a meager number of electric vehicles and missing out on billions of investment dollars compared with China and Europe, according to new research.

Last year’s sales figures provide a striking example. Sales of passenger EVs in the European Union and the United Kingdom rose by 54% as the European Union geared up for strict new emissions standards, according to a new study by S&P Global Platts Analytics. Meanwhile, an ongoing emissions battle between California and the Trump administration contributed to American EV sales dropping by 9%.

A similar story is playing out in factory investment.

According to tabulations by Atlas Public Policy, a research group, the United States severely lags Europe and Asia in EV investment from automakers and their suppliers. Of the $359 billion committed globally to electrification, only 11% is going to the United States. By comparison, 24% goes to Germany and 35% to China.

Why are automakers sending their dollars and vehicles elsewhere?

“They were looking to sell them in a place where it was easier to sell,” said Nick Nigro, the founder of Atlas.

Europe’s policies are squeezing automakers especially hard this year and next. They are “selling as many EVs into Europe as possible” right now, said Zane McDonald, an analyst at S&P.

The motivator? Avoiding billions of euros in fines that kick in at the end of this year for automakers with high emissions.

“When there’s proper policy drivers that create an ecosystem that is favorable for EV sales, that’s where automakers are going to divert their supply chains, that’s where they’re going to sell their models,” McDonald said. “That is what we see lacking in the U.S.”

Consumer taste also accounts for America’s halfhearted entrance into electric cars, analysts say. Americans drive bigger and heavier vehicles, and commute with them farther, than Europeans or Asians. Smaller cars are easier to convert to electric while making them affordable and capable of longer range.

Automakers, including General Motors Co., Honda Motor Co. and Mazda Motor Corp., are turning to Europe and China as the place to introduce new EVs. The trend encompasses even SUVs, which Americans buy in larger numbers.

For example, GM last week debuted the Menlo, an EV crossover, in China. The car’s most expensive option has a maximum range of 254 miles. The price is less than $23,000 after government incentives for the base model. The price and performance both exceed GM’s only American EV, the Chevy Bolt.

The Menlo joins two other EVs, the Buick Velite 6 and the Baojun E200, that GM makes in China. All three are part of a joint venture between GM and SAIC Motor Corp., a Chinese state-owned automaker.

GM did not respond to inquiries about why it makes more EVs in China than it does in the United States.

Another high-profile American electric car, Ford Motor Co.’s Mustang Mach-E, had its first rollout to the automotive press this month in London. The car “will be available simultaneously in both the U.S. and key European markets late this year,” according to a Ford spokeswoman.

A tale of two policies

America’s political strife over auto emissions is the near opposite of what is happening in the European Union. The economic bloc is preparing to fine automakers that don’t reduce their emissions, while individual European countries are providing hefty incentives for customers to go electric.

While miles per gallon is the rule of thumb by which Americans measure emissions, Europe measures emissions per kilometer, based on laboratory tests. Those guidelines are getting more stringent this year.

By year-end, automakers must emit no more than 95 grams of carbon dioxide per kilometer per car, up from a lower bar last year. The rule covers 95% of the light-duty vehicles an automaker sells, McDonald said. Then, in 2021, the rule extends to cover 100% of the fleet.

A caveat entices carmakers to produce electric vehicles because they get weighted toward the low-CO2 goal. “It looks at all EVs and essentially double counts them,” McDonald said.

Every gram of carbon dioxide per vehicle in excess of the target generates a fine. “The cost could be billions of euros,” McDonald said.

Meanwhile, European countries from the United Kingdom to Spain to Romania are offering incentives that reward drivers for buying electric or low-emissions vehicles. Some are equal to or more generous than the $7,500 tax credit offered in the United States.

Under the Trump administration, vehicle emissions standards have devolved into an acrimonious tug of war that has California and the federal government at each other’s throats.

The Trump administration has proposed a widespread rollback of EPA’s auto emissions standards, which had been tightened under the Obama administration. It also moved to eliminate California’s ability to set its own emissions standards for vehicles, which are largely responsible for the hybrids and EVs on the roads today.

At the end of last year, Congress considered but did not pass proposals to strengthen the federal EV tax credit. Many opponents of incentives say markets, not government spending or regulations, should determine the trajectory of EVs.

China has an incentive system for EVs similar to California’s. It requires automakers to produce a certain percentage of zero-emissions vehicles via a credit system. Last year’s percentage was 10%, this year’s is 12%, and next year’s is 14%, said McDonald.

China’s EV sales, after several years of precipitous growth, slowed to 3% last year.

“All things being equal, the strongest markets are now driven by policy,” said Atlas’ Nigro. “It’s up to U.S. policymakers if the U.S. is going to reclaim that mantle of policy leadership. The amount of money at stake is so much that I hope policymakers will pay attention.”