Finance

Why Biden's $3B Battery Production Plan Could Be A Game-Changer

The future of American ground transportation is electric.

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President Biden Arrives Back At The White House

(Photo by Anna Moneymaker/Getty Images)

The Biden administration has set an ambitious goal when it comes to electric vehicles. By 2030, the White House intends to see electric vehicles account for 50 percent of sales domestically.

Americans won’t fundamentally change the way they travel overnight. Even eight years to ramp up to EVs comprising half of the domestic vehicle market is a fast timeframe. As of last year, only about 4 percent of the new automobiles sold in the U.S. were electric.

Yet, the EV market has proven itself to be viable. The currently undisputed leader in electric vehicles is Tesla, which keeps smashing production and profits expectations. Tesla CEO Elon Musk said on the company’s most recent earnings call that Tesla is confident it can beat its 2021 numbers by 50 percent this year, producing as many as one-and-a-half million cars in 2022.

For investors, the market leader for EVs has been a lucrative choice. A shareholder who got in immediately on the Tesla IPO would have realized nearly a 6,000 percent return by holding onto Tesla stock for the first 10 years after the company went public.

Although they are a little late to the table, Tesla is now facing a crowded field of budding competitors. Startups like Lucid and Rivian are seeking to beat Tesla at its own game even as established automakers (including Ford and General Motors) increasingly focus on the electric future of the automobile.

The White House is paying attention. Earlier this week, the Biden administration announced the launch of a $3.1 billion initiative aimed at improving and expanding domestic production of EV batteries and battery components.

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According to the Department of Energy, the $3.1 billion will be allocated to fund grants to help companies build or retool battery manufacturing facilities. Some of the money will also be used to establish battery recycling plants. This $3.1 billion battery initiative is already funded as part of the $1 trillion bipartisan infrastructure measure signed into law by Joe Biden late last year.

The battery plan comes on the heels of an executive order from Joe Biden meant to help mining companies fund feasibility studies on domestic extraction of lithium, cobalt, graphite, manganese, and other materials critical for the production of EV batteries and other green technologies. Traditionally, American companies have relied heavily on foreign sources for battery raw materials. International tensions of late, in addition to a renewed focus on creating American jobs, have underscored the importance of domestic development of mineral resources.

Considering the amounts of government money being thrown around lately, $3.1 billion might not seem like all that much. For instance, Biden’s latest request to Congress for aid to Ukraine has a price tag of $33 billion. In the realm of domestic non-military spending, however, to largely aid private manufacturers, $3.1 billion represents a significant investment and a real commitment to American-made EVs.

This new $3.1 billion initiative from the Biden administration to bolster the development of domestic battery production could help all EV makers. So far, no rival has been able to hold a candle to Tesla’s results. But, with a little help from the government, and the possibility of avoiding complicated foreign supply chains to secure key battery components, newcomers to the EV market might be able to avoid some of the challenges Tesla had to simply barrel through on its way to EV dominance.

The future of American ground transportation is electric. This new $3.1 billion pool of funding for American-made batteries and battery components could make that future a reality just a little sooner. If it works as intended, it could also keep more of the EV jobs, and more of the EV profits, at home.

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Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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