Increasing Manufacturing Capacity to Electrify Passenger Vehicles

Key Takeaways

• The Biden Administration and automotive industry have announced ambitious targets for the number of electric vehicles they hope to deploy by 2030. 
• Their current target is 60% electric vehicle sales by 2030, but Wohl and Schrag's analysis of the industry’s capital expenditures demonstrates that automakers have so far made investments in manufacturing capacity sufficient to achieve half of the proposed federal target. 
• In order to bridge the gap between the industry’s targets and their current trajectory, supply-side incentives unlocking more manufacturing capacity could go further than demand-side incentives like consumer tax credits.

Executive Summary

In April 2023, the Biden Administration proposed greenhouse gas emissions regulation designed to result in 60% of new passenger vehicle sales in 2030 being plugin electric. Meanwhile, the 13 global automakers operating in North America have publicly committed to individual targets that, in aggregate, sum to 43% zero emission vehicle (ZEV) penetration in total North American passenger vehicle production volume by 2030, an implied 2.7M units below the Administration’s 60% target. Despite industry’s and governments’ publicly announced ambitions, analysis of the industry’s capital expenditures demonstrates that automakers have so far made investments in manufacturing capacity sufficient to achieve 31-39% ZEV penetration of new vehicle sales. Announced investments may not represent the totality of industry’s privately planned or potential investments; however, this analysis quantifies industry’s progress relative to pledges and demonstrates automakers must virtually double the capabilities enabled by current investments in order to achieve the federal target.

Based on the automakers’ capital investments, 28 of 67 North American factories are on track to have ZEV production capacity by 2028. Of the 39 remaining legacy factories producing only internal combustion engine (ICE) vehicles, 24 of them were built over 30 years ago and will require business-as-usual upgrades to sustain operations. These older factories could be prime candidates for ZEV retrofits, where conventional facilities are upfitted with new ZEV manufacturing resources and equipment. Instead of promoting demand-side incentives like consumer tax credits, supply-side incentives focused on inducing ZEV retrofits of legacy factories or pushing automakers to invest in the long-term technoeconomic benefits of building new ZEV assembly plants from the ground up could accelerate the electrification of passenger transportation.