Republicans Say EV Subsidies Help China

Climate champion Sen. Sheldon Whitehouse, D-R.I., used his perch at the head of the Senate Budget Committee to ask witnesses about the future of electric vehicles. Although Sen. Lindsey Graham, R-S.C., helped shape the panel, the future of electric vehicle production in the U.S. seemed somewhat cloudy if Republicans are able to win back the White House and Senate and retain a House majority, given most Republicans on the panel's views of the EV subsidies that are reshaping the EV supply chain.

Whitehouse said at the July 31 hearing that globally, 20% of new cars sold in 2023 were electric. "The future of personal transportation is electric completely independent of whatever the United States wants to do," he said. He said that 20 states will soon have either EV battery plants or EV assembly plants, and that motor vehicles and auto parts are America's second-largest export. "We want to be part of that [EV] action," he said.

Alliance for Automative Innovation Chief Policy Officer David Schwietert testified that 9.5% of U.S. sales last year were zero-emission, but acknowledged that EV sales have cooled. "Choppy growth is certainly not surprising," he said. "This transition takes time and patience."

He asked for Republicans and Democrats to have a shared vision on how to support the auto industry's transformation.

Sen. Debbie Stabenow, D-Mich., asked Schwietert if the auto industry wants policy continuity, and he said it's important. He said auto companies are already working on models that will come out four years from now.

But the shared vision Republicans seemed to have was that it's fine for electric vehicles to exist, but that the government should not set targets for their market share -- something they characterized as a "mandate" -- and there shouldn't be subsidies for their purchase or manufacture.

Sen. Ron Johnson, R-Wis., said his wife drives a plug-in SUV, and is able to drive it for one-third the cost of a similarly sized gas SUV, but said he doesn't think there should be government subsidies.

"Our subsidies are providing a market for Chinese batteries," he said.

Jesse Jenkins, head of Princeton University's Zero Lab and an assistant engineering professor, responded that the Inflation Reduction Act, which prohibits subsidies for batteries made with Chinese components or critical minerals, was "specifically designed to excise China from the supply chain."

Sen. Chuck Grassley, R-Iowa, said the IRA provides "billions in EV subsidies for the rich," and said that EVs are better for wealthier people in suburbs and cities. He complained that EVs rely "on nefarious countries" in the supply chain, and said that those on the left are hypocrites for talking about fighting child labor, since cobalt is mined by children in the Congo.

Sen. John Kennedy, R-La., asked: "If electric cars are so swell, how come we have to pay people to drive them?" He also asked the witnesses to tell him how much money the U.S. would have to spend in subsidies to get EVs to make up half of sales.

Schwietert replied, "The cost of inaction of the U.S. not competing is far worse."

Silverado Policy Accelerator Co-Founder Maureen Hinman, a former assistant U.S. trade representative for environmental issues, replied, "I’m more concerned about the risk to the U.S. economy losing the automaking industry."

In her opening statement, she said that U.S. subsidies were a consequence of Chinese subsidies. She said that China can build an EV battery cell for $82 a kw, because the cost of materials is 30% cheaper there. In the U.S., those cells cost $114 a kw. Batteries make up 30% of the cost of an EV, she noted.

Hinman said that China builds manufacturing untethered to demand, and exports its surplus at below cost.

Graham agreed with his Republican colleagues that China dominates EV batteries and, particularly, processing the materials needed to make those batteries.

"The bottom line is: this is coming, whether we like it or not," he said. "I’d like to compete in this space. We’re behind in the game that's being played by China very aggressively."

He asked Hinman if Chinese dominance in EVs is inevitable.

Hinman, "Absolutely not," she replied, if the U.S. and allies "move quickly to coordinate policies."

Jenkins told the panel that some of the IRA tax credit rules have only recently been finalized. "Industry needs to know they can count on a stable policy environment," he said, and asked for both parties to maintain existing policies that support EV manufacturing.

"We’ve just set the stage," he said. "Let’s let our American companies play on that stage, and do what they do best."