President Joe Biden said Thursday he would invoke the Defense Production Act to boost domestic mining and production of key minerals used in electric vehicles, a big step to help Detroit automakers switch to electric vehicles.
It was part of a larger announcement about gasoline prices.
The move means battery materials will be added to the list of items covered by the 1950 law, which former President Harry Truman invoked to make steel for the Korean War and which President Donald Trump called to boost mask production amid the COVID-19 pandemic. .
The Detroit Three are investing billions in an all-electric future, including building new factories to assemble batteries for electric vehicles. As for Biden, he is delivering on his promise to help accelerate the adoption of electric vehicles.
“We need to end our long-term dependence on China and other countries to supply the inputs” used in American electric vehicles, Biden said.
By invoking the Defense Production Act to incentivize companies to mine and process more minerals for electric vehicles, it will help the United States fight climate change and lead to the creation of new jobs.
“It will also save money for your family,” Biden said, citing studies that indicate a typical driver will save about $80 a month by not having to pay for fuel.
Domestically producing the materials that go into electric vehicles will provide all automakers with a more secure supply chain and lower manufacturing costs.
There would also be fewer production interruptions.
“Currently, our raw material supply chains come from Australia, South Africa, South America, Russia and China. Most of these raw materials (refining) are done in China,” said Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor. “Because of the political conflicts, we have to eliminate some of this dependence on other countries.”
Bailo agreed that Biden’s move will likely create jobs as new mining companies appear. It will also reduce shipping costs, but compared to the cost of raw materials, logistics expenses are “a drop in the ocean”.
This means that the price displayed on electric vehicles will not drop for short-term car buyers.
“It makes sense on paper to control the supply chain, but that doesn’t mean it will help the consumer,” said Joe McCabe, CEO of automotive consulting firm AutoForecast Solutions. “It’s going to help reduce manufacturing costs, which will help EV manufacturers’ profit margins. But we’re still trying to convince a consumer to spend $50,000 and more on EVs.”
Detroit Three reaction
Still, the only way to achieve a meaningful increase in electrification is to further control costs and domestic production of basic electric vehicle ingredients, McCabe said.
“We will then be able to reduce the cost of manufacturing electric vehicles,” McCabe said. But he also noted that sticker prices will remain high. “Manufacturers can’t afford to waste money on every vehicle in the name of carbon footprint and those general economic issues of running a business are still there.”
The Detroit Three know the cost of transitioning to an all-electric future.
General Motors, for example, is investing $35 billion by 2025 in electric vehicles and self-driving technologies. GM said it will bring 30 new electric vehicles to market by then. It funds this research on sales of expensive gas-powered pickup trucks and large SUVs.
GM is also part of a joint venture with LG Energy Solution called Ultium Cells LLC. Ultium Cells is building three battery cell factories in the United States to help power GM’s future electric vehicles. GM is building one of these Ultium Cells factories in Lansing.
Continued:GM to invest $7 billion in 4 factories across Michigan, creating 4,000 jobs
Late last year, GM began building the 2022 GMC Hummer EV pickup, its first electric vehicle, based on its new battery cell and propulsion platform called Ultium. The Hummer is built at Factory ZERO in Detroit and Hamtramck. This spring, GM will bring the Cadillac Lyriq electric SUV to market. GM has just started production of Lyriq at Spring Hill Assembly in Tennessee.
Ford Motor Co. said it will increase spending on electric vehicles to $50 billion, from $30 billion previously, through 2026. It offers the Mustang Mach-E SUV and the Ford F-150 Lightning will be launched In the coming months.
Continued:Ford’s plan to cut waste by $3 billion will channel money from gas-powered vehicles to fund electricity and technology
Stellantis and South Korea’s LG Energy Solution announce they will invest $4 billion to build an electric vehicle battery plant in Windsor, Ontario. Stellantis has plans for a Ram 1500 electric pickup and a Dodge muscle car.
GM, Stellantis and Ford deferred comments on Biden’s stint at the American Automotive Policy Council.
“We appreciate the administration’s efforts to help strengthen our country’s battery supply chains and its recognition that many of these critical minerals are vital to the production of electric vehicles,” said the former Governor of the State. Missouri, Matt Blunt, President of the American Automotive Policy Council. A declaration. “We will continue to review this important policy as additional details become available.”
Continued:With the next Stellantis EV battery factory in play, Michigan officials are touting their ability to compete
McCabe said the United States has learned lessons from the pandemic and other global events in recent years, primarily that “reliance on other markets for materials” can disrupt the supply chain and lead to shortages. and higher prices.
“We have to find a way to be proactive and not reactive,” McCabe said. “We must be our own source.”
Adding minerals such as lithium, nickel, graphite, cobalt and manganese to the Defense Production Act list could help mining companies secure $750 million under the Defense Production Act fund. title III of the law, according to a Bloomberg report citing anonymous sources. Biden’s decision could also help recycling battery materials.
The law helps fund “production in current operations, productivity and safety improvements, and feasibility studies. In addition to electric vehicle batteries, the directive would also apply to high-capacity batteries,” says the Bloomberg report.
MP Materials Corp. is the only U.S. company producing rare-earth metals needed for electric vehicles, analysts said. But the Biden administration has allocated at least $6 billion under the infrastructure bill to develop a battery supply chain in the United States.
Currently, China dominates in mining and processing minerals for batteries, experts said.
“Most of the lithium, which is used in batteries, is mined in South America or Australia and shipped to China for processing and then shipped to other parts of the world to be put into electric vehicles,” he said. Sam Abuelsamid, principal e-mobility analyst at Guidehouse Insights in Detroit. “That does not make any sense.”
Moreover, electric vehicle batteries are heavy and the cost of transporting them around the world also does not make sense, Abuelsamid said, adding: “You are going to consume the emissions that you save by making these vehicles with the emissions used to ship them. around the world.”
Short term compression
But Abuelsamid said there was hope for the car buyer’s ability to afford an electric vehicle in the medium term.
The prices of some key materials such as nickel, lithium and cobalt – all used in electric vehicle batteries – have soared this year.
Lithium prices have soared due to increased demand for electric vehicles, Abuelsamid said. Lithium is widely available around the world, including North America, but there has been little mining in North America due to low market demand – until recently.
Unlike others, Abuelsamid said consumers will eventually see EV sticker prices come down.
“Right now, we’re in a short-term shortage situation with these raw materials driving up prices – partly because of demand and partly because of geopolitical issues,” Abuelsamid said.
For example, a notable portion of the nickel produced comes from Russia and that stopped with the war in Ukraine, Abuelsamid said, “so the price went up within days.”
“But increasing local production will help reduce the costs of electric vehicles over a three- to five-year period and into the future,” Abuelsamid said.
Free Press writers Phoebe Wall Howard and Eric D. Lawrence contributed to this report.