January 26th, 2021 by Steve Hanley
While signing his Buy American executive order on January 25, President Biden said, “The federal government 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.” The order closely tracks promises Biden made during the recent presidential campaign. And he is right. The US government currently owns or leases almost 650,000 vehicles according to the General Services Administration. That includes 245,000 civilian vehicles, 173,000 military vehicles, and 225,000 post office vehicles. Combined, they traveled 4.5 billion miles in 2019 according to The Verge.
In an email to TechCrunch, the GSA said, “GSA is committed to exploring opportunities to leverage the purchasing and leasing power of the federal government to address the climate crisis, including greening the federal fleet. GSA currently manages over 224,000 passenger vehicles in its fleet to support the Federal Government’s mission. By leveraging clean energy vehicle technologies, GSA will support the President’s climate goals, while working with the American automotive manufacturing industry to ensure that these next generation vehicles are built in America by American workers.”
For EV advocates and people who value a sustainable environment, this is wonderful news but this will be a process that takes years to complete. Biden isn’t going to replace all those gasoline and diesel powered vehicles with the stroke of a pen. No leases will be terminated early. No cars and trucks that have not reached the end of their useful life will suddenly be showing up in the used car market. But policy drives change, so having a policy like this at the very top sends signals to the commercial sector that will speed the changeover.
First, there are any number of questions to be answered. What is an American car built by American workers? Does it include a Ford Mustang Mach-E assembled in Mexico? Does it include a General Motors electric delivery van assembled in Canada? “Made in America” has a certain appeal but the reality is that almost every industrial product manufactured today uses parts sourced from around the world — robots from a German company owned by the Chinese, computer chips from Asia, glass from Brazil, and so forth. The truth is very few vehicles sold in America contain 50% or more parts sourced from American suppliers and it can take years to reconfigure supply chains created in the days before globalization became a dirty word.
Then there is this question. Do US manufacturers even have the capacity to build 650,000 electric vehicles this decade? How long will it take to shift production to meet the new rules? And how many years will it take to replace all the vehicles in the US government fleet? If you said 10 to 15, you are probably in the ballpark.
Electric vehicles have one unique feature. They need to be charged regularly but there aren’t enough chargers to make that happen right now. Biden says he wants another 550,000 chargers installed across America ASAP. That would help but again that isn’t something that is going to happen overnight. And who will operate those chargers? Will they be free to the public or operated by for profit companies like EVGo and ChargePoint? There are a lot of questions that need answers before the dancing in the streets begins.
Jobs! Jobs! Jobs!
There are two notions that are part of every politician’s lexicon — tax cuts and jobs. In 2017, we got the former. Now we are going to get the latter, apparently. Joe Biden is a traditional Democrat in that he embraces the labor movement but America in general does not. Mercedes, BMW, Nissan, Mitsubishi and many Tier One suppliers have chosen to build factories in the South for one primary reason — southern states have an anti-union bias. The only place where the UAW is still strong is in the traditional auto manufacturing hubs in and around Detroit.
Ford and GM both have factories in Canada and Mexico because of NAFTA but the workers there are by definition not Americans nor are they UAW members, although many in Canada are represented by the Canadian Auto Workers, a close cousin to the UAW. Will those companies reposition their manufacturing strategies to fit themselves into Biden’s Made in America pledge? And what about Rivian, Workhorse, Lordstown Motors, Canoo, Fisker, and other EV startups? They aren’t using union workers. Part of this discussion may be an attempt by the Biden administration to boost the American middle class without getting into a policy fight about the minimum wage.
What About The Gas Tax?
“I want to pay more in taxes!” said no one ever. And nowhere do taxes affect more people personally everyday than when it comes to filling their tanks with gasoline. The federal gas tax is supposed to help pay for our roads and bridges and tunnels, but in reality Congress is so terrified of raising it that is hasn’t done so since 1993! Today it is set at 18.4 cents per gallon, but adjusting for inflation, the effective rate is 10.2 cents a gallon.
Electric cars by definition don’t use gasoline and so pay no federal gas tax, which has led some to demand new fees on them. A bill in the Ohio legislature last year would have punished tree hugging electric car weenies by imposing a $1000 a year annual registration fee. Yet electric cars use the same roads, bridges, and tunnels so why shouldn’t they pay their fair share?
In his testimony to the Senate during his confirmation hearing recently, new Secretary of Transportation Pete Buttigieg said “We need to look at any responsible, viable revenue mechanism we can all agree on,” according to Motor 1. Republican Senator Mike Lee asked him if new revenue mechanisms could include an increase in the gas tax. “It’s possible,” Buttigieg said. “Certainly many states have taken that step including my own — but it’s not the only approach. There are several different models. In the short to medium term that could include revisiting the gas tax, adjusting it, and or connecting it to inflation.” After his testimony, an aide told the press, “A variety of options need to be on the table to ensure we can invest in our highways and create jobs, but increasing the gas tax is not among them.”
Another path forward would be to eliminate the gas tax entirely and find another way to finance America’s infrastructure needs. After all, the US spends almost a trillion dollars a year on its military but there is no separate war tax. Nor is there a separate tax on education, foreign aid, or environmental protection. If America can finance wars on a pay as you go basis, why can’t it do the same for its transportation infrastructure?
The Take Away
Policy leads innovation. It unlocks investments and broadens the discussion about how to get to the future in a way that is rational, effective, and fair to all. By making his Buy American pronouncement, President Biden is setting the country on a course that will alter its relationship with the transportation sector in ways we can’t even imagine today. Within a generation, young people may be amazed that we actually went to gas stations to put gasoline in our cars. The damage done by such a simple act is disguised by the fact that everyone does it. But that doesn’t make it right, or sensible, or wise.
A neighbor of mine who works for a major US automaker scoffs at the idea of electric transportation. But people once scoffed at the idea of air travel or electricity from solar panels. The Biden agenda may be just what America needs to become a leader instead of a follower in the EV revolution. It’s coming with or without us. We can hold our breath and stamp our feet all we want but the tipping point has already arrived. From here, we can be leaders or followers. Biden clearly chooses to lead.
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