Electric vehicles have long been a cornerstone of efforts to phase out fossil fuels and resulting greenhouse emissions.
It’s no surprise, then, that the Biden administration has made increased adoption of EVs a priority in its plans to combat climate change.
However, the U.S. lags woefully behind Europe and China when it comes to incentivizing EVs. Plagued by inadequate infrastructure, misaligned government incentives and significant consumer hurdles, the U.S. EV industry continues to struggle to win market share.
U.S. EV policy has long centered on tax incentives as a pillar, which reduces the price premium. But tax incentives don’t overcome customer hesitation to change or help build out the associated infrastructure and technology developments needed.
If the U.S. is to be a leader in producing and driving EVs, we propose a three-pronged approach.
1. Practical incentives. Under current policy, tax incentives run up against hard caps. Already, industry leaders General Motors and Tesla have faced a phase-out on incentives for their vehicles after 200,000 were sold.
In February, Democrats proposed a reintroduction of the GREEN Act, which would extend the caps on vehicles sold beyond 200,000. This is wise policy but comes with the caveat that tax incentives to consumers would drop by $500.
Although the extension of caps is good for auto manufacturers, the proposal does less to change the final purchase calculus of the consumer.
Accordingly, we need to make it easier to own an EV and fully realize the benefits of the technology. This can be done at every level of government.
For instance, we recommend using federal funds to encourage municipal and utility development of infrastructure, such as providing incentives for owners of multifamily homes or apartments to provide charging technology. Similarly, policymakers should work with building code regulators to introduce minimum electrical wiring for EV charging capability in new homes.
As we recover from the COVID-19 pandemic, commuting will also resume for many auto owners. Federal, state and local governments could provide incentives to employers that provide charging and also build out sensible amenities such as designated EV lanes, preferred parking spaces and reduced licensing fees.
2. Innovations in charging. Industry, policymakers and utilities should work together to lower the cost of building high-speed charging infrastructure.
Critical improvements that we believe would heighten the value of EVs include corridor charging stations, tax credits for research and development and heightened investments in public-private groups similar to Electrify America, which is in the midst of an effort to invest $2 billion over a 10-year period in EV infrastructure, access and education.
That figure should be at least doubled, and that timeline should be accelerated significantly with new, similar groups that increase corridor build-out and improve the infrastructure.
3. Focus on competition. The U.S. should explore the establishment of an EV Center of Excellence. Such institutions are used elsewhere to devote financial, human and time resources to explore how to improve charging and automotive technology.
For instance, the U.S. currently is a leader in power-electronics semiconductor technologies used in EVs, such as silicon carbide, which make charging more efficient. Without more attention, dominance in those technologies will be turned over to other regions much like other semiconductor technologies.
Furthermore, battery technology has long been held with Korean, Japanese and Chinese companies such as LG Chem, SKI, Panasonic and CATL. With continued investments in new chemistries and solid-state batteries, the next generation of technology may be at home in the U.S.