Biden's infrastructure proposal could boost transition to EVs, AVs

New technology means big changes for the auto industry. Pair that with a large, national investment and the transition to new mobility could happen quickly and efficiently.

The trick is in the timing.

The Biden administration has rolled out a $2 trillion infrastructure proposal that could have major implications for electric and autonomous vehicles. It's an ambitious plan that has garnered some praise from rubber industry associations, including the U.S. Tire Manufacturers Association.

"Infrastructure investment is critical to our nation's economic competitiveness," USTMA CEO Anne Forristall Luke said. "It is critical to motorist safety. It is critical to saving consumers money. It is critical to environmental progress because it contributes to fewer greenhouse gas emissions from more efficient vehicle transportation."

The proposed $115 billion to modernize bridges, highways and roadways directly impacts the tire and automotive industries. Most immediately, it protects the investments made by consumers.

As new vehicle technology continues to evolve, components that allow for more sophisticated communications—connected vehicle or connected tire technology—and advanced driver assistance systems become more expensive to build and repair.

"Rebuilding roads and bridges would help with reducing wear and tear on vehicles, reducing potential damage to newer—and increasingly expensive—technological components on a vehicle," said Kevin Riddell, LMC Automotive senior manager of powertrain forecasting. "This would result in reduced consumer operation costs for a more positive ownership experience."

Building a better, stronger and more efficient network of roads and bridges nationwide also lays the groundwork for further advancements in autonomous technology.

"Much of what we are doing with advanced safety and moving toward automation requires well-maintained roads with clearly marked lanes," said Kristin Dziczek, senior vice president of research at the Center for Automotive Research. "It's not necessarily roadside infrastructure, it's that built infrastructure that the car expects. Degraded infrastructure is much more difficult for those AVs to interact with."

Biden's infrastructure proposal is wide reaching, covering areas such as roads and bridges, transit systems, new mobility and energy grids, among others. All of these things connect and contribute to the future of the auto industry.

But the plan doesn't end there; it calls for investments in the auto industry, specifically in the advancement of electric vehicle technology. Biden wants to set aside $174 billion to help auto makers spur domestic supply chains, retool factories, and shore up domestic supplies of products and materials critical for the next-generation battery-powered vehicles.

"The plan is quite commendable because it deals with multiple facets the industry is facing from securing the raw materials for the batteries and spurring domestic production of BEVs rather than a continued focus to import them," Riddell said.

Curbing range anxiety

Since taking office, Biden has advocated a transition to EVs, pointing to the environmental benefits as one reason for doing so. The direction was set Jan. 25 when he signed an executive order pledging to prioritize federal purchases of made-in-America cars with U.S.-made componentry.

That aim is reiterated in The American Jobs Plan and adds incentives and investments that drive the adoption of EVs nationwide.

But if consumers are going to make the leap to EVs, they'll need to be convinced that the vehicles serve their needs.

First and foremost, the auto industry is addressing these concerns by offering electrified options across all segments, including SUVs and pickups. And the number of offerings is growing.

Last year, in North America, 67 EV models were available across all segments. But by 2024, more than 200 electric vehicle models will be in showrooms across the continent, according to CAR data.

Still, there's hesitation on the part of the consumer.

"The biggest concern most people have with BEVs is range anxiety, particularly in rural areas or areas where temperature can significantly affect the battery storage," Riddell said. "This issue has been around for years, but its importance cannot be understated."

The Biden administration attempts to address these concerns in the infrastructure plan proposed. In it, the president sets a goal to build 500,000 charging stations nationwide by incentivizing government and private sector investment.

Should the U.S. achieve this goal, Riddell said, the number of charging stations would be five times the number of gas stations in the U.S. today.

"Investing to add 500,000 new charging stations will go a long way in addressing the concerns when considering purchasing a battery-electric vehicle and its refueling limitation," Riddell said.

Dziczek agrees that the charging infrastructure is important to the acceptance of EVs. She also is confident in the country's ability to meet that challenge.

The larger concern, she said, is when and how investments in the overall energy grid are made. For the charging infrastructure to truly work—to support the number of EVs that the administration and others envision being on the roadways—and to address motorists' concerns about easily and quickly recharging, it needs a reliable, upgraded energy grid behind it.

Riddell agrees timing is important, and adds that Biden's proposed $100 billion investment in electrical grid upgrades is key for the auto industry.

"The requested $100 billion investment to improve the national energy grid, will ensure the new infrastructure is prepared to better serve the expected, considerable rise in electricity demand," he said.

Economic ramifications

Even with all of its details, there are a lot of unanswered questions around the plan, particularly in the timing of the investments and the rollout and the sequencing of priorities outlined.

For instance, hybrid electric vehicles can, with minimal changes to operations, be built on many of the same production lines used to build internal combustion engine vehicles. Transitioning to fully electric, battery-powered vehicles is more of a challenge, and it requires larger time and monetary investments to convert production lines.

There's also an entire supply chain built around the batteries themselves. Ensuring that everyone along that supply chain has the chance to meet demand as it rises will be important, too.

"I think the major challenges continue to revolve around the batteries," Riddell said. "We need to be able to ramp up supply in the required time. The factories need enough flexibility to accommodate for producing batteries of varying chemistries both currently in use and those under development."

Even if the industry quickly pivots to accommodate a sharp uptick in BEV demand, there could be ramifications for Midwestern economies that are built around a sophisticated network of businesses serving today's auto industry.

Rushing too quickly to BEVs could weigh heavily on those communities.

"There are big job impacts here," Dziczek said, "especially in Michigan, Ohio and Indiana."

Combined, the trio of Midwestern states account for about 40 percent of the country's ICE vehicle production, half of the engine production and 66 percent of transmission production.

"That's a lot of built infrastructure around jobs and tech that is going away," Dziczek said. "That is another reason for careful sequencing and thoughtful transition, because those jobs are critical to the economies of those three states."

Biden's goal is for the federal government to lead the way on the transition to newer, cleaner mobility, encouraging state and local governments as well as U.S. residents to do the same.

But when it comes to nationwide adoption of e-mobility, the timing and sequencing of the transition matter.

"A large focus of this administration is that EVs become affordable for middle-income people," Dziczek said. "But middle-income people don't buy new cars."

Most middle- and low-income families who can afford to purchase and own vehicles, often rely on the used vehicle market. But the COVID-19 pandemic proved how easily they could be priced out of car ownership.

When the pandemic forced closures of new vehicle plants and auto demand remained steady, it put a strain on the used car inventory, which caused pre-owned vehicle prices to skyrocket. That, in turn, made used cars unaffordable for some.

This could be an indication of what may happen during a quick transition to EVs. If electric vehicles don't offer affordable middle-class price points and simultaneously put constraints on the available used vehicle inventory, it could leave many Americans without vehicle purchase options.

"It could have a real transportation inequity outcome," Dziczek said. "It's really expensive to own a car and EVs are more expensive to start."