The Battery Belt electric car is reshaping the heart of America

Data: Automotive Research Center;  Map: Jared Whalen/Axios
Data: Automotive Research Center; Map: Jared Whalen/Axios

The climate bill that President Biden signed into law yesterday will open up tens of billions of dollars in subsidies for high-tech electric vehicle factories in the South and Midwest.

Why is this important: The package is a big down payment on fighting climate change and moving toward energy independence as the United States races to build a national supply chain for batteries and other critical materials.

  • It could also be a major economic jolt for much of the country that some call the Battery Belt, where many electric vehicle-related factories and facilities are being built.

Driving the news: The auto industry has already invested billions in new electric vehicle and battery manufacturing facilities in North America over the past two years.

  • Now automakers and battery suppliers will be eligible for billions of dollars in federal loans and tax credits to offset those costs and spur additional investment.

For instance: The government will provide a tax credit of $35 per kilowatt hour (kWh) for each battery cell produced in the United States.

  • This represents 35% of the current average cost of producing a battery cell.
  • Ford, for example, could get a $3 billion tax break for the twin plants it is building in Kentucky, which will be able to produce 86 gigawatt hours of batteries per year. (The IRS has yet to determine how exactly the credits will work.)

There is also a tax credit for battery modules made in the USA – groups of cells grouped together that fit into a battery pack.

  • At $10/kWh, the credit would cut the cost of assembling an EV battery by about a third, according to Bloomberg NEF.

Critical materials and minerals products in the United States also qualify for a 10% tax credit under the new law.

  • This will help companies like Redwood Materials, which is investing $3.5 billion in Nevada for processing cathodes and anodes – essential work in the battery production process that is currently done mostly overseas.

There’s also $2 billion in grants to retool existing car factories to make clean vehicles, and up to $20 billion more in loans to build new factories.

The plot: And yet automakers aren’t happy with the law, largely because its strict supply chain requirements mean far fewer electric vehicles will qualify for steep consumer tax credits soon. departure.

Yes, but: Over time, the relocation of battery production should drive down the cost of electric vehicles and reduce US dependence on China.

  • The optimists’ view: By encouraging a national supply chain of electric vehicle components, the law will help reduce costs for automakers — and they’ll pass those savings on to consumers in the form of cheaper electric cars.

Between the lines: Essentially, the US has shifted incentives for EV adoption from consumers to manufacturers – instead of making electricity cheaper for car buyers, the new law rewards automakers for building vehicles electric with batteries made in the United States.

  • Lawmakers don’t “just roll out new rules and say ‘good luck’. They’re putting tens of billions of dollars on the table to help [automakers] make it happen,” said Joe Britton, executive director of the Zero Emission Transportation Association.

The bottom line: Automakers’ scramble to meet domestic content requirements will lead to a rapid increase in manufacturing capacity for electric vehicles, batteries, and the components and materials needed to produce them.

About Robert Pierson

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