Shifting gears: Biden policy pushing auto industry to greener technology

WASHINGTON—Two of the Biden administration's biggest policy goals are taking shape, and the U.S. auto industry is right in the middle.

With a pair of executive orders signed Jan. 25 and 27, President Biden laid the foundation for his administration's climate policy and emphasized the value of American jobs and U.S.-made products in the process.

With the Made in America executive order signed Jan. 25, he called on the U.S. government to lean into green automotive technology and prioritize purchases of American-made cars with U.S.-made components.

In remarks given ahead of that signing, Biden pledged to expand U.S. contracts to include more small- and minority-owned businesses, while also focusing on U.S-made electric vehicles.

"The federal government," Biden said, "also owns an enormous fleet of vehicles, which we're going to replace with clean, electric vehicles made right here in America by American workers, creating millions of jobs—a million auto worker jobs in clean energy—and vehicles that are net-zero emissions."

Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, said the move could boost the auto industry, which already had pivoted to invest heavily in electric vehicle technology.

"The auto industry has wondered, 'if I build it, will they come? Will the consumer be there?' " Dziczek said. "Well, the federal government is lining up, saying 'we are a big consumer, and we are here.' "

The federal government, Dziczek said, has about 650,000 fleet vehicles. How many of those are light vehicles is hard to tell, but the potential impact of an investment like the one Biden proposed is substantial.

The EV purchase pledge supercharges what had been a narrow focus for the U.S. government. In 2019, for instance, the federal government purchased 50,000 new vehicles across its agencies as well as the military and postal service. Of those, just 167 were EVs.

Moreover, the federal government's leadership on the purchase of EVs could encourage state, local and municipal governments to follow suit, Dziczek said.

Biden's executive order also prioritized U.S.-made vehicles containing U.S.-made parts, which is worth noting, Dziczek said.

"I think a critical thing about the (executive order) is he didn't just say he wanted to buy electric vehicles and transform fleets," Dziczek said. "He said he wanted to buy electric vehicles that had at least 50 percent of their content made in the U.S. by workers who have a choice to join a union."

Biden's executive order also is well-timed because North America is poised for an unprecedented EV boom. Factors impacting technology, manufacturing and demand are coming together to create a new era for the automotive industry in terms of EV rollouts.

"We don't make that many EVs in North America, but we are about to make a helluva lot of more," Dziczek said. "Three times as many models are going to be made in North America."

GM shifts gears
Just as the Biden Administration articulated its goals for climate, jobs and infrastructure, General Motors Co. signaled that it's prepared to lead the way on development and production of electric vehicles.

The auto maker said Jan. 28 that it will discontinue production of gasoline-powered light vehicles to focus exclusively on battery-powered light vehicles beginning in 2035. The ultimate goal is to achieve carbon neutrality by 2040, the company said.

"General Motors is joining governments and companies around the globe working to establish a safer, greener and better world," GM CEO Mary Barra said in a LinkedIn post Jan. 28. "We believe that with our scale and reach we can encourage others to follow suit and make a significant impact on our industry and on the economy as a whole."

GM plans to invest $27 billion in electric and autonomous vehicle development and launch 30 EVs globally through 2025, targeting all price points with zero-emissions vehicles.

"This is not out of step with other auto makers," Dziczek said, adding that all major auto makers have committed resources to the design and manufacturing of electric vehicles. "Every auto maker is going there. GM just went there first and very loudly."

GM's commitment to carbon neutrality follows promises from auto makers such as Ford Motor Co., Volvo Cars Corp. and Nissan Motor Corp. Ltd., but GM's goal is about a decade ahead of the targets set by others.

Focus on climate
News of GM's big shift also came one day after Biden signed a climate policy executive order, laying the groundwork for his administration's climate goals. These efforts also are underscored by the Jan. 20 signing of an executive order to rejoin the Paris Climate Agreement.

Shortly after Biden signed an executive order to reverse the Trump Administration's decision to pull out of the Paris accord, Ford Executive Chairman Bill Ford released a statement applauding the move. He also affirmed the company's commitment to reducing emissions and making "the best electric vehicles."

"While we cannot eliminate all the carbon-producing manufacturing and automobiles overnight, we can choose a path that will eventually take us to a zero-emissions future," Ford said.

During his first week in office, Biden also directed the Department of Transportation and the Environmental Protection Agency to reconsider the Trump administration's 2019 decision to revoke California's authority to restrict tailpipe emissions by April and review fuel-efficiency standards for light vehicles by July.

It is expected that Biden will drop the previous administration's effort to block California from setting its own emissions standards, and establish tougher fuel-efficiency rules that promote zero-emission vehicles. In doing so, Biden swings the policy pendulum back toward Obama-era policies, which are more in line with global standards, particularly in the European Union and China. Dziczek said this helps to provide some stability for the auto industry.

"The industry likes stability and predictability," she said, noting that standards in Europe and China already had impacted the North American auto industry. "If (global auto makers) are moving toward those goals in other parts of the world, we can't help but be dragged along, even if we have regulations that are out of step."

Ultimately, she said, while the U.S.'s policy is impactful, the industry is setting some of its own targets and often takes a global approach to its fuel efficiency and emissions goals. Because auto makers are planning long term—6 to 8 years ahead—their vision is greater than a single presidential term.

American infrastructure
The Biden administration's climate goals may be serving as its North star, but the path ahead goes through areas of focus that were essential to the president's Build Back Better strategy. And that impacts the auto industry in several ways.

Biden's climate plan touches on upgrades to American infrastructure and calls for the installation of 500,000 EV charging stations nationwide. This, Biden contends, not only helps to boost new automotive technology, but create American jobs.

"That means millions of good-paying jobs, using American-made steel and technology, to rebuild our roads, our bridges, our ports, and to make them more climate resilient, as well as making them able to move faster and cheaper and cleaner to transport American-made goods across the country and around the world, making us more competitive," Biden said.

Dziczek echoed that charging infrastructure will be critical to the growth of greener automotive technology throughout the U.S., especially if the government is planning to lead the way in adoption of the technology.

"We are going to have to do something if electrification is going to be the way we power our vehicles," she said. "The government plays a big role in setting the tone and direction in that area."

Overall, Biden's first week in office was marked by a flurry of executives orders that set the tone for priorities and policies on the horizon near term. Many of those are likely to impact the auto industry, especially if he continues a broad approach to his highly prioritized areas of focus.

Dziczek said she's not surprised by the sweeping and detailed moves and expects to see more complex policy ahead.

"The world doesn't operate in silos," she said. All of these areas—climate, jobs and infrastructure—"are complex problems that are going to require multifaceted solutions."