The Biden administration is awarding nearly $2B in grants to General Motors (NYSE:GM), Stellantis (NYSE:STLA) and other carmakers to help restart or expand electric vehicle manufacturing and assembly sites in eight states.
The Energy Department will issue grants totaling $1.7 billion to create or retain thousands of union jobs and support auto-based communities in the three presidential battleground states of Michigan, Pennsylvania and Georgia as well Ohio, Illinois, Indiana, Maryland, and Virginia.
According to Biden, the grants-- paid for by the landmark IRA of 2022--will help deliver on Washington’s commitment to ensure the future of the auto industry is made in America by American union workers.
“There is nothing harder to a manufacturing community than to lose jobs to foreign competition and a changing industry,” said U.S. Secretary of Energy Jennifer M. Granholm. “Even as our competitors invest heavily in electric vehicles, these grants ensure that our automotive industry stays competitive--and does it in the communities and with the workforce that have supported the auto industry for generations,’’ she added.
Last week, GM announced it has received a $500 million federal grant to help the company convert an assembly plant in Lansing, Michigan to produce EVs. GM has already invested over $12 billion in its North American EV manufacturing and supply chain since 2020.
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The grants were hotly contested, with the DoE revealing it received four times as many applicants as grant recipients. DoE says all projects that were awarded funding currently employ Americans working in union jobs in the U.S.
The selected projects will create more than 2,900 jobs and help ensure that about 15,000 union workers are retained across all 11 facilities, the White House has said. According to the DoE, the new grants complement $177 billion in private sector investment in EV and battery manufacturing since Biden took office.
The UAW has, however, warned that a too rapid transition from ICE to EVs could put thousands of jobs at risk in key states such as Michigan, Ohio, Illinois and Indiana.
UAW President Shawn Fain has applauded the announcement, saying the grants and loans "makes clear to employers that the EV transition must include strong union partnerships with the high pay and safety standards that generations of UAW members have fought for and won."
Impact On Oil Demand
With the year at the midpoint, the EV boom shows no signs of slowing down.
EV sales globally have now hit 18% of all new vehicle sales, with BEV sales up by 14% YoY in April, while plugin hybrids jumped 51% YoY. A big driver of the EV megatrend is falling costs, with Tesla Inc.’s (NASDAQ:TSLA) most affordable model now $6,500 cheaper than its ICE peer, the cheapest BMW 3 Series, according to Bloomberg. Meanwhile, Gartner has predicted that EVs will be cheaper to produce than ICE vehicles of the same size in only three years, thanks in large part to improvements in manufacturing methods with production costs dropping faster than battery costs.
“New OEM incumbents want to heavily redefine the status quo in automotive. They brought new innovations that simplify production costs such as centralized vehicle architecture or the introduction of gigacastings that help reduce manufacturing cost and assembly time, which legacy automakers had no choice to adopt to survive, ”Pedro Pacheco, vice president of research at Gartner, has said.
Rapid EV adoption has elicited dire predictions for the oil sector. Last year, Bloomberg predicted that global demand for road fuel will peak in 2027 at 49 million barrels per day driven by the rapid adoption of electric vehicles, ever-improving fuel efficiency, and shared mobility. Just a week ago, British Oil & Gas giant BP Plc (NYSE:BP) predicted that global oil demand will peak next year while wind and solar capacity will continue to grow rapidly.
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In its latest edition of its annual Energy Outlook, BP has published a study of the evolution of the global energy system to 2050. BP has modeled its predictions on two key scenarios: The Current Trajectory and Net Zero. BP has predicted that oil demand will peak by 2025 at around 102 million barrels per day (bpd) under both scenarios.
However, the rate of decline thereafter will be determined primarily by the pace of falling oil use in road transport. In the Current Trajectory, BP sees oil consumption gradually declining over the second half of the outlook to around 75 million bpd in 2050. The drop is, however, much more pronounced in Net Zero, with demand falling somewhere between 25 million and 30 million bpd by 2050.
By Alex Kimani for Oilprice.com
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