The Inflation Reduction Act is having an effect on American car manufacture. There are several news reports about new battery factories being developed in the US, new lithium mining deals, and new factories being built in the US even though it has only been open for two months. Price signals, as economists refer to them, are just a fancy way of explaining that people and businesses alike are looking for the best value possible. Some of those large firms are already modifying their plans to take advantage of the new economic realities, thanks to the US government’s recent announcement that owners of electric vehicles will receive tax credits if those EVs are manufactured here.
Audi shuts down its US factory for electric vehicles (IMG1)
Audi is carefully considering whether or not to establish a manufacturing facility in the United States. Audi’s head of technical development Oliver Hoffman stated that the Inflation Reduction Act will have a significant impact on our approach in an interview with Automotive News (paywall). The Q5 crossover is now produced in Audi’s sole North American factory in San Jose Chiapa, Mexico. However, constructing a production line in Canada may be advantageous for Audi given the shift to electric propulsion that is now being considered.
We are honestly scanning left and right. What might be the chance for us to meet up with a powerful “Volkswagen Group” in the distance, he asked. Now that the laws have changed and the government is investing heavily in electric vehicles under unique conditions, we are on our way and eager to figure out how to meet these requirements.
Volkswagen makes the ID.4 battery-electric SUV at its recently enlarged facility in Chattanooga, Tennessee, unlike Audi. As a result, it is the only vehicle from the Volkswagen Group that is currently qualified for the Inflation Reduction Act’s incentives.
A recent deal between the Volkswagen Group and the Canadian government to use minerals mined there for future battery production may indicate a stronger commitment to the development of electric vehicles in North America. Hoffman stated that a definitive decision on bringing EV production to the U.S. might be made in the early part of 2023, while the future of Audi manufacture particularly is still undetermined.
Electrive hypothesizes that the Tennessee-based Volkswagen EV factory and Audi might share space. On the other hand, it is rumored that Volkswagen is considering building a second factory in the US, which may or may not be in Chattanooga. In any new facility, it stands to reason that the two Volkswagen Group members might concurrently produce vehicles that are identical.
The issue is that only one Audi EV, the Q4 e-Tron, is currently constructed on the common MEB platform. Based on the PPE chassis that was jointly developed with Porsche, the rest of the Audi electric vehicle types. Although we have a long history in the USA, this is a fantastic opportunity for us to expand there with our high-end electric cars.
In order to allow VW and Audi to produce more EVs in America in a new facility, may Volkswagen Group opt to change the course of events and base more of its next vehicles on the PPE platform or another common chassis? That is just conjecture. The only thing we can be certain of is that the IRA has rearranged the playing field, which opens the door to a variety of unanticipated realignments.
THE TESLA SEMI ANDAMP; THE INFLATION REDUCTION ACT
Hyperdrive, a new segment of Bloomberg News, concentrates on news regarding electric vehicles. Author Dana Hull speculates about a potential link between Tesla’s unexpected news that it will begin deliveries of its long-awaited Semi on December 1 in today’s email. The first trucks will be used by PepsiCo at a beverage plant in Sacramento and a Frito-Lay facility in Modesto, California.
Why, five years after its first announcement, is the Tesla Semi finally entering into production? Hull adds that although Musk hasn’t addressed this, the climate legislation that President Joe Biden signed into law in August certainly appears to be the cause.
Before the Inflation Reduction Act was approved and made law, Musk claimed that the Semi was essentially on hold because Tesla lacked sufficient battery capacity. According to Musk, it didn’t make sense to create trucks until the business had overcome battery production challenges because the Semi consumes around five times as many cells as a car would, but won’t sell for five times what a vehicle does, in January of last year.
Those cell restrictions don’t appear to have changed. During Tesla’s most recent earnings call, Musk described battery output as the fundamental rate limiter for switching to sustainable energy. Additionally, it didn’t seem like Tesla was near to increasing production of the larger 4680 battery cells that Musk has said the Semi will employ during that call. He said that those cells would be critical to Tesla’s plans for 2023, but not for the current year.
Sen. Joe Manchin and Majority Leader Chuck Schumer declared they had reached an agreement on legislation a week after the earnings call, which would implement the bulk of Vice President Joe Biden’s climate program. While the $7,500 clean car tax credit for new car buyers garnered a lot of attention, more expensive commercial vehicles are eligible for a significantly larger incentive of up to $40,000 per truck.
Look what I found! Days after the Senate approved the legislation, according to Hull, Musk declared that the Semi will begin shipping this year. Aside from Elon Musk’s tweet promising the Tesla Semi will have a 500-mile range and be a blast to drive, very little technical facts regarding the vehicle have been made public as of yet. How many semis exactly is Tesla sending to PepsiCo? PepsiCo and Musk have not commented.
Musk didn’t grovel for the significant rewards. Instead, he opposed Biden’s previous Build Back Better proposal, stating he thought government should play the role of a referee rather than a player, and he urged Washington to stop getting in the way and stop impeding development.
The Inflation Reduction Act, however, seems to have encouraged Tesla to advance its stalled product rather than getting in the way. According to RMI, the tax credit will hasten the adoption of electric medium- and heavy-duty trucks. In the majority of use cases, the IRA tax credit reduces the cost of owning an electric vehicle compared to a diesel one, with urban and regional electric trucks becoming more affordable than diesel ones as early as 2023.
We are aware that the first Tesla Semis should arrive in around 6 weeks. Although production has technically started, we have no idea how many trucks Tesla will produce this year or the year next. The likelihood is that the manufacturing ramp will start out quite slowly. We’ll have to wait and see when it takes up speed.
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