Regardless of what happens on the March 1st deadline for a new U.S.-China trade pact, there is no turning back from a future of electric vehicles. In the U.S., sales of plug-in electric vehicles have increased steadily since 2012 and spiked last year with sales estimated at 400,000, doubling 2017’s total. Even this, though, is a fraction of what is to come. By 2025, six car makers are expecting to sell more electric cars in the U.S. on their own than were sold last year overall. The only question, thanks to the threat of a 25-percent tariff from the trade war, is where those electric vehicles will be manufactured.

In the U.S., this is not a front-of-mind topic when talking about the trade tensions largely because interest in buying electric cars is – so far – higher in the rest of the world. In 2018, fewer than one in five U.S. consumers expressed an interest in having any alternatives to gas or diesel engines. In Mexico, interest in alternatives such as hybrid and plug-in electric was double that of the U.S. In China, more than 60 percent of consumers want electric vehicles.

One explanation for the disparity in interest in electric vehicles between the U.S. and other countries is that those other countries have surged ahead in literally paving the way for this new mobile technology. In 2018, Sweden built an electrified public road near Stockholm that can recharge electric car batteries as it’s driven on, and China announced plans for an “intelligent highway” that will not only charge electric cars but supply clean energy to the grid. India, which wants 30 percent of all vehicles to be electric by 2030, has issued ambitious new rules to encourage EV use, including letting people set up their own charging stations without a license. And both France and the U.K. want to ban sales of traditional combustion-engine vehicles by 2040.

In the U.S., the lack of a charging infrastructure in big cities, let alone on the interstate highway system, is a major factor in unrealized consumer demand. In fact, Americans cite the infrequency of charging stations more often than price as a reason not even to consider buying a plug-in electric car.

There is currently no federal effort in the U.S. to make charging stations ubiquitous, to build electric-enabled freeways, or to legislate a horizon for the combustion engine. Quite the contrary, in fact. California has decided to end manufacturing and registration of gasoline-powered vehicles by 2040 as well as to aim for 5 million electric vehicles on the road by 2030. The federal government, however, is attempting to revoke the state’s authority to do so under the Clean Air Act.

All of those factors are likely to change with time. Right now, though, the largest barrier in the electric vehicle market is the China-U.S. trade war. As a response to the U.S.’s threatened 25-percent tariffs, in June 2018 China raised import duties on a $34-billion list of American goods, including electric cars, making it harder for U.S. auto manufacturers to reach the world’s biggest EV market. There is evidence that this also impacted the domestic auto market. An analysis of social media around this time showed that the impacts of the trade war on electric vehicles was the leading topic among those discussing electric vehicles on these platforms. China later backed off in hopes of reaching a trade deal by the March 1 deadline set by the Trump Administration. That clock is now ticking.

Research shows that these perceived policymaking impediments – lack of charging infrastructure, federal opposition to progressive environmental mandates, and the U.S.’s trade war with China – are big reasons why most Americans are not even considering, let alone purchasing, electric cars. The biggest obstacle is the lack of charging stations which makes sense since those are physical examples of the technology’s viability in daily life. Conversely, these factors indicate that pent-up U.S. demand will see clear roads ahead once the barriers are removed.

Until these issues are resolved, however, it appears other countries will get a healthy head start in implementing EV technologies on their streets at scale. This could cause global shifts in the auto sector, particularly in manufacturing. Electric vehicle technology is here to stay, but where exactly those vehicles will be made for generations to come could depend on the policy uncertainty we are witnessing today.

 

Sara Gourlay is the Global Sector Head for Technology and Telecoms at Hill+Knowlton Strategies in London, and Jakob Hesketh is a Managing Director for Hill+Knowlton Strategies in New York.

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