The DOE Announces More EV Spending

Despite the collectively agreed-upon wisdom of The Notorious B.I.G., the US Department of Energy (DOE) is working with the strategy that mo’ money will in fact reduce the problems its facing.

What happened: Last week, the DOE announced a $15.5 billion funding package for the American automotive industry aimed at speeding up its transition to electric vehicles.

Breaking down the spending:

• $10 billion will be available as loans and $2 billion as grants for manufacturing conversion projects in turning existing car factories into EV factories.
   
• $3.5 billion will be available for expanding battery manufacturing and raw materials processing.

If you guessed the money was coming from the Inflation Reduction Act (IRA), you’d only be partially right. The $2 billion in grants will be supported by the IRA but the $3.5 billion comes from the Bipartisan Infrastructure Act.

Why give mo’ money? Besides the obvious motive of speeding up EV production and adoption, the Big 3 automakers—General Motors, Stellantis, and Ford—are currently squaring up with the United Auto Workers (UAW) union for negotiations as contracts near expiry.

• Key wording in the announcement hints that this new influx of government money will be directed towards projects that retain collective bargaining deals and “high-quality jobs” (read: union jobs).

The timing of the announcement and potential strike of the UAW seems to show that the US government is looking to smooth things over with cash and appease both sides.

Big picture: It’s a win-win for the Biden administrations: the UAW is supported with funding for its members while the Big 3 receives support in reducing the cost of transitioning towards EVs. Plus the money will help meet the ambitious regulatory targets and the US government avoids interference between its climate, supply chain, and labour goals.