Historically the leader in the quintessentially-American auto industry, the U.S. may be falling behind the global competition for innovation and jobs in transportation, a trend the upcoming New York International Auto Show should make clear.
Traditional combustion engines face serious competition from alternative upstarts, which have declined in price while their travel range and performance have expanded. Yet the Trump administration remains focused on the rear-view mirror, rather than the road ahead.
Sales of U.S. hybrid and electric vehicles (EVs) rose more than 23 percent in 2017 to nearly 195,000, though still a tiny fraction of the overall market. American manufacturers produced four of the top five best sellers, split between GM and Tesla. Whether it’s hybrid, plug-in, natural gas, or self-driving vehicles, the industry stands at the cusp of fundamental change.
Governments worldwide sense a tipping point and are adapting their policies accordingly. Last year, Britain and France announced they will stop sales of new diesel and internal combustion vehicles by 2040. Germany will likely to follow suit. India’s National Electric Mobility Plan envisions 6-7 million EV sales annually by 2020. China, where consumers snapped up over half a million alternative vehicles last year, is working on a timetable for phasing out gas or diesel powered engines.
With billions of potential consumers up for grabs, U.S. production facilities have started to mobilize. Tesla is hiring workers for facilities in Nevada and upstate New York as it ramps up to fill an estimated half million orders of its Model 3. Toyota and Mazda announced a joint venture for a new $1.6 billion factory in Alabama for electric and vehicles that will create 4,000 new jobs. That’s far more than Carrier ever promised — let alone delivered.
Overseas producers also want a piece of the action. Volvo plans to use a hybrid-electric base for all its vehicles by 2020. Honda anticipates hybrid and electric autos will make up two-thirds of its global sales by 2030. Ford will collaborate with local manufacturers in India and China to develop low cost EVs for domestic and export markets.
Lawmakers can help maintain American leadership in a sector it helped create while also boosting the bottom line of nearly 70,000 small business owners. Most convenience stores selling fuel in the U.S. are individually owned; they face shrinking margins and competition from big box warehouses. Offering tax credits or rebates to add charging stations would expand their product range and enable them to sell online reservations, pump or plug in, and shop while they wait.
Washington State has already started installing charging stations along popular interstate routes, funded with vehicle registration fees matched by the private sector. The Trump administration’s infrastructure proposals tout public-private partnerships — why not add these to the mix?
It certainly would come at a critical moment. Before the 2008 recession, U.S. automakers accounted for 63 percent of light vehicles produced in North America, falling to about 50 percent today. Talk of tariffs and tinkering with NAFTA could hurt an industry deeply tied to Canada and Mexico, the two largest destinations for U.S. exports.
A more flexible approach can reward both the public and private sector as this transition begins to take shape. If American companies can profit from both traditional and alternative energy products, why settle for one?
That’s exactly what leading oil exporting nations are already doing. In 2017 Saudi Arabia launched a $40-50 billion program in renewable energy investments into solar and wind projects over the next several years. Norway offers some of the largest incentives worldwide toward the purchase of hybrid and electric vehicles. They both play vital roles in securing a clean and efficient economic future.
With India introducing solar powered trains and European firms developing hybrid electric plane engines, now is not the time to wax nostalgic. America wins by embracing innovation, and with it, continued wealth creation for the next generation.
Lisa Kaess worked as a consultant in international finance for more than 20 years at Geoffrey Bell & Company and at her own firm, ATRIUM advisors. She is an economist and creator of Feminomics®, focusing on policy issues relating to money, economic, and financial themes for women. Kaess is an associate with Cityforum UK.