Howdy pardners, and welcome back to The Autopian’s morning roundup of auto industry news! It’s Wednesday, Feb. 1, and we’re in a good mood because we’re coming off this site’s biggest readership month yet. Thank you for your continued support, we have some cool things to announce here soon and that’s all because of you fine people.
For now, let’s dive into today’s news: President Biden’s Inflation Reduction Act could be a bigger effing deal than expected, Hyundai and Kia get back on track, Toyota’s top scientist fires back at EV evangelists and Americans aren’t doing great on the car repossession front.
The EV Tax Incentive Boom For Battery Manufacturing Could Be Even Bigger Than Predicted
We begin today with a scoop from Axios‘ Joann Muller, who reports that the tax breaks for automakers and battery manufacturers under the IRA might just be significantly more than even Congress initially anticipated. In case you’ve been living under a rock, the legislation passed last year resets and modernizes the EV and PHEV tax credits, adds credits for used cars for the first time, and incentivizes the production of both cars and batteries in this country because manufacturers that produce abroad won’t qualify for the credits. (It’s also been a giant, confounding mess on a lot of fronts, but hey, that’s the federal government for you.)
A big goal of the IRA is to build a homegrown battery and EV manufacturing infrastructure so that industry isn’t entirely ceded to China. And so far, early projections indicate the plan is working.
Axios reports the Congressional Budget Office projected the tax credits specifically for battery manufacturing would equal about $30.6 billion over 10 years; new research from Benchmark Mineral Intelligence indicates it could be more like $136 billion over 10 years, if not higher than that thanks to Tesla’s new battery plant plans. Hot damn.
This number seems to include both car companies and battery manufacturers building facilities in the U.S. to take advantage of the credits.
A few notable details from that story:
Tesla’s Nevada plant, for example, will soon be able to produce 100 gigawatt-hours of battery cells, and that could grow to 500 gigawatt-hours in the future. At an annual production rate of 500 gigawatt-hours, the credits would be worth a staggering $17.5 billion per year.
Ford expects more than $7 billion in tax breaks from 2023 to 2026, with CEO Jim Farley predicting a “large step-up in annual credits” starting in 2027 during a recent earnings call.
GM chief financial officer Paul Jacobson told reporters that the automaker will earn about $300 million this year, with the credits eventually being worth $3,500 to $5,500 per vehicle.
Now, here’s where you might be saying, “We shouldn’t be subsidizing electric vehicles! The government shouldn’t be picking winners and losers, the market should sort all of that out!” Sure, in theory. But remember government intervention in energy markets is one of America’s proudest traditions and we already subsidize the oil and gas industry in a huge way, although that amount will be handily trumped by the EV subsidies if this latest research proves true.
A way to modernize America’s green energy operation and add manufacturing jobs, or a giant tax break gift to big corporations? How about both?
Hyundai And Kia Mount A Comeback
Last year was a pretty brutal one as automakers fought through the chip shortage and supply chain issues, but things are finally starting to improve on the production front. Case in point, according to Automotive News: Hyundai and Kia posted some sales wins on the back of EV demand and fleet sales. It’s not huge yet, but it’s something:
Also, good for Genesis here. That brand makes some really good stuff these days but it still feels kind of under the radar, even if it shouldn’t. Anyway, inventory is getting back on track, but the economy is squirrely and interest rates could go up a bit, which could put people off from actually buying all these new cars in stock. Fun times.
Toyota’s Scientist Hits Back At ‘EV-Only Extremists’ But That’s Not The Whole Story
On his way out the door, one gets the sense Toyota CEO Akio Toyoda is none too happy that his company’s been saddled with this anti-EV, anti-green image. And who can blame him? But Toyota’s later to the game on EVs than most rivals and its hydrogen push has gone absolutely nowhere.
Now, in Automotive News, the automaker’s chief scientist is hitting back against those who say “EVs are the only way forward in the global battle to cap carbon dioxide emissions.” I have some issues with this piece that I’ll explain, but first, Toyota’s Chief Scientist Gill Pratt at Davos last month:
Toyota’s chief scientist, Gill Pratt, argues that with lithium as scarce as it is, automakers can reduce carbon emissions more quickly through a multipronged approach to electrification that includes widespread deployment of hybrids, rather than by focusing exclusively on fully electric vehicles. His math acts as a rebuttal to those proposing bans on new vehicles that use any gasoline or diesel in the mission to slow global climate change.
Americans Have A Car Repo Problem, Again
Now, more Americans are falling behind on their car payments than during the financial crisis. In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. That compares to 5.04% in January 2009, the peak during the Great Recession.
Higher interest rates are making it even more difficult to make the monthly payments. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive. The rate can be much higher for subprime borrowers.
I know the easy thing to say is “Don’t buy above your budget,” and nobody should. But that can be incredibly hard to do with skyrocketing inflation and the occasional crisis that may upend your ability to pay bills.
It doesn’t help that America’s car-centric infrastructure means most people need a car to get to work, leading to stories of people like this poor 2013 Honda Fit owner who’s hiding her car from creditors, or the guy with a 26% interest rate on a 2013 Dodge Journey. We’re all feeling the sting these days.
The Flush: What Are Your Thoughts On Toyota’s Chief Scientist’s EV Pushback?
Is a mixed powertrain lineup the best way forward right now? In the near future? In the distant future?
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