In January, General Motors announced it will produce only electric vehicles by 2035. In May, Ford said that EVs will account for 40% of its sales by 2030. The two automakers will be pouring in $27 billion and $22 billion, respectively, to make this happen, and they’re not the only ones.
You don’t need a weatherman to tell you which way the wind is blowing. These investments are part of an industry-wide trend away from the internal combustion engine that has contributed significantly to global warming. Altruistic or not, the auto industry recognizes it needs to be a part of reducing carbon emissions and is steering itself toward a greener future.
It can’t do this work alone. And though federal and state governments need to put policy in place to support the transition to EVs, there are plenty of climate skeptics in positions of power in the United States who are creating a traffic jam.
That’s a problem. While we bicker over whether climate change is real, our economic rivals sure aren’t.
Look no further than the EV industry in China, where a huge middle class and heavy state intervention have propelled Chinese automakers to the top of this burgeoning market. The EV explosion there was no accident: Years ago, China’s government recognized the auto industry’s approaching energy shift would be an inflection point, and it has planned for it. China’s now gargantuan EV industry is the result of a multi-pronged strategy of preferential loans, direct subsidies, and consumer-side incentives, along with other forms of support.
It still gets plenty of help, but now the industry is akin to a self-propelling machine, complete with the necessary internal supply chains and industrial ecosystems that can steadily produce these vehicles and their parts. And, by design, the Chinese EV brands borne out of this effort are poised to compete with the international auto industry’s incumbent leaders. They may leapfrog them entirely.
A world-leading auto industry is a good thing to have headquartered in your country. For decades, our own has been an engine of growth and technological ingenuity that continues to employ millions of Americans. Even today the economy in entire regions of our country is built around the auto supply chain. But while American automakers were once the global leaders in innovation and production, that won’t necessarily be the case with EVs.
That’s in no small part the result of foot-dragging. The rise of China’s automakers should serve as a wake-up call for policymakers in the U.S: Our inaction will heavily influence the future of crucial domestic industries, and our rivals will seize the opportunities that we won’t.
Some states have gotten into the driver’s seat, including by setting increasingly stringent fuel efficiency standards to keep the momentum going. California – whose economy, if it were to be carved out of the U.S., is the fifth largest in the world – has pledged to end outright the sale of combustion engine vehicles there by 2035. And although its own fuel standards advance or roll back depending on the political affiliation of the White House, the federal government is pushing this as well. There’s even talk of a carbon border tax in the Democrats’ latest federal budget proposal.
The Biden administration also appreciates what industry will need in order to compete. One of the president’s senior economic advisers, Brian Deese, recently laid out the White House’s support for a full-fledged industrial policy of America’s own, built upon supply chain resilience, public investment, public procurement, and equity. “Strategic public investments to shelter and grow champion industries is a reality of the 21st century economy,” Deese said in a June speech. “We cannot ignore or wish this away.” This is something that has not been seriously discussed in national politics in decades, and laying it out in public is among the first steps toward implementing it.
But now comes the hard part: the implementation. As Congress and the administration work on building out a clean energy economy, it will be important to lean in on EVs. That will demand a combination of strong domestic procurement rules, a reliable and substantial amount of public investment, and steady, visible leadership.
We can’t wait much longer or the moment (and China) will pass us by. It’s time for a new engine. In our cars, they will be electric. For our economy, it should be an industrial policy.