Auto Industry at Ground Zero of Biden’s $2T Infrastructure Program

President Joe Biden’s $2.3 trillion American Jobs Plan is a “once-in-a-generation investment,” he said, that, if approved, would be the country’s largest infrastructure program since World War II.

The measure faces a tough battle in Congress but could build widespread popular support for the broad range of projects it would fund — everything from electric grid upgrades to the modernization of the country’s transportation network. Much of what was proposed on Wednesday would benefit automakers and auto buyers, among other things providing billions to promote the shift to electrified vehicles.

The plan is “big, yes. It’s bold, yes. And we can get it done,” the president said.

But the Biden administration will have to convince a highly polarized Congress to enact the legislation needed to put the American Jobs Plan on the books. Proposing a grand infrastructure plan has become something of a rite of passage for new presidents, whatever their party. But it’s been decades since anything that truly can be called “bold” has gone past the proposal stage.

Broad impact on transportation system

The proposed infrastructure program would impact the auto industry in a number of ways:

• The U.S. bridge and highway network has been crumbling, in many places, into third-world status. The program would result in major repairs, as well as construction of new roads;
• It would provide funding for semiconductor R&D and help address the chip shortage that has been crippling the auto industry lately;
• A number of elements in the proposal would benefit the push to electrification, with $174 billion specifically earmarked to “win” the EV race against Europe and China;
• It would set in motion a critical build up of the country’s vehicle charging network, a key step in making EVs more attractive to motorists;
• Even plans to fix the U.S. electric grid will benefit EVs, helping ensure the grid can handle putting tens of millions of EVs on the road in the coming years.

The infrastructure plan generated some initial, positive feedback from auto industry leaders. “This is an opportunity to assert American leadership, to win in the marketplace and to support American workers, and so that’s really what we want to continue to work with the Biden administration and in Congress to do,” John Bozzella, the CEO of the trade group, the Alliance for Automotive Innovation, said during a call with the media.

On Monday, ahead of the American Jobs Plan’s unveiling, the Alliance joined up with the Motor & Equipment Manufacturers Association, as well as the United Auto Workers union, to send a letter to Biden calling for a “comprehensive approach” to promote the development and adoption of battery-electric vehicles.

EVs plugged into plan

About $174 billion, or roughly 8%, of the spending the president proposed, would directly benefit electrification efforts. That doesn’t include money to be spent on fixing the electrical grid to ensure EVs have energy to charge up, among other things. But it would help provide places to plug in.

During his campaign for the White House, then-candidate Joe Biden outlined a goal of installing 500,000 charging stations across the U.S. Moving ahead on that would be one of the infrastructure plan’s goals.

That won praise from Pat Romano, the CEO of ChargePoint, one of the largest developers of public charging stations, including the new, high-speed systems that will slash the time it takes to plug in, charge up and then go.

“By establishing grant and rebate programs for state and local governments, Biden’s plan will increase private sector investment in EV charging infrastructure across the nation, an approach that is already driving investment today,” Romano said in a statement.

Overcoming obstacles to adoption

There are a number of obstacles to widespread EV adoption, according to industry experts and, along with range anxiety, many consumers are put off by the higher cost for battery vehicles. To offset that, the Biden plan seeks to retain the current incentives that provide up to $7,500 in federal tax credits for qualifying plug-in hybrids and EVs.

One unanswered question is whether the administration will seek to expand upon the current EV incentives. Congress set a threshold that phases out the tax credits for any manufacturer topping 200,000 sales. Tesla and General Motors have already lost their incentives and Nissan soon is set to follow. The automakers have lobbied to have the threshold eliminated or, at the least, raised.

One possible tweak, according to the White House, would “give consumers point-of-sale rebates and tax incentives to buy American-made EVs, while ensuring that these vehicles are affordable for all families and manufactured by workers with good jobs.”

Bringing EV production home

It is unclear if that means the Biden administration would support eliminating tax credits for foreign-made BEVs, but considering the focus on jobs in the infrastructure bill, that is one possibility. Right now, the vast majority of BEVs sold in the U.S. are built here — largely by Tesla. But buyers soon will have an increasingly diverse mix of alternatives to choose from.

Ford and General Motors will produce most of their EVs in the U.S. but the expanding list of imports include offerings from Jaguar, Porsche, Audi, Nissan and Volkswagen. (VW currently imports its new ID.4 from Germany but plans to shift production to its Chattanooga factory in 2023 while adding a second BEV model there. It also will import other electric models, such as the ID.Buzz minivan from Mexico.)

For many, the concern is a potential flood of electrified vehicles from China, which has made a national goal of gaining leadership in both EV sales and production.

“This is a new type of moonshot, to surpass the competition and command the best technology and innovation,” said U.S. Rep. Marcy Kaptur, D-Ohio, co-chair of the House Auto Caucus. “And that’s going to take all of us leaning in together.”

Jobs, jobs, jobs

Not everyone is entirely sanguine about a transition to electric vehicles, even if that means more U.S. production. The concern is that battery cars are simpler to build and, as a result, will require less labor. A study by AlixPartners released in October 2019 estimated that the typical BEV needs about 40% fewer man-hours of labor than a gas-powered vehicle.

“Workers will disproportionately suffer if we do not make the transition to a green economy in the right way,” UAW President Rory Gamble said in a statement, adding that it is essential that “this transition is stable, reliable and creates quality union-wage jobs and flexible to market demand not relying on a one-size-fits-all solution.”

If the American Jobs Plan doesn’t win over Congress, all these proposals mean nothing, of course. That’s no easy challenge considering just its price tag, never mind the political polarization that currently grips Washington.

Who’ll pay

“If it’s going to have massive tax increases and trillions more added to the national debt, it’s not likely,” Republican Senator Mitch McConnell, the minority leader, said after being privately briefed on the infrastructure plan by President Biden.

Some expected the administration to propose raising taxes on the nation’s wealthiest consumers to help fund the proposal. Instead, it would raise the corporate tax rate from 21% to 28% while making it difficult for businesses to avoid taxes by shifting profits abroad.

That has already raised flags from the U.S. Chamber of Commerce, its chief policy Officer Neil Bradley calling the tax portion of the proposal “dangerously misguided.”

Partisan opposition

The White House tried to include some measures favored by the GOP in a bid to gain bipartisan support but it could seek to narrowly win approval from Democrats alone, much as happened with the recently enacted COVID relief bill.

“If people have other ideas of how to pay for it, that’s what this process is going to be about,” a senior administration official told reporters Tuesday evening, according to the Detroit News. But the White House seems determined to press ahead, no matter what. As with the COVID bill, it may seek public support to soften Republican opposition, arguing that the American Jobs Plan is intended to “invest in critical areas where we know that our productive capacity as a country is being set back.”