Chip shortage highlights the need for coordinated federal, state policy on zero-emission vehicles

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U.S. in for the long-haul on zero-emission freight

by Casey Horan

Recently, a friend sought my help finding a zero-emission upgrade for his old gas swallow. Encouraged by increased cost competitiveness and a desire to be more environmentally conscious, he was eager to see the new zero-emission car models. To our dismay, dealer after dealer informed us that not only had the supply of all new ZEVs been backed up for several months, but prices had risen significantly. Why? Each retailer mentioned supply chain problems.

A global shortage of chips – tiny semiconductors that make all our electronics work – has forced automakers to delay or stop production of all new vehicles, including ZEVs. Although this specific disturbance will not affect the long-term market adoption of ZEVs, it underlines the need to increase domestic production. The United States must not allow excessive reliance on foreign suppliers of ZEV components to hamper our ability to meet transportation electrification targets, including for medium and heavy ZEVs, which are a critical part of plans to reduce emissions and address public health and equality concerns across the nation.

To prevent further market instability and delays, Congress should adopt the Build Back Better Act, and states should implement coordinated policies to promote investment in domestic supply of essential ZEV parts.

Supply problems cause delays

2021 has been a banner year for new MHD ZEVs, but it could have been even better. Many prominent companies have been expected to start or expand production to replace highly polluting diesel trucks and buses. However, the shortage has affected these plans, including:

Of course, these problems are not isolated to electric trucks, as Navistar, Volvo and other manufacturers have also seen impacts on their combustion vehicle lines.

Chip shortages highlight the need for a coordinated federal, zero-emission government policy Click to tweet

The transition to ZEVs provides a unique opportunity to build a domestic manufacturing industry that will help protect U.S. manufacturers and consumers from the volatility of global supply. Creating a strong base for domestic supply can be a hedge against future price increases driven by global imbalances. Developing this capacity takes time, and given the urgent need to move to ZEVs, we must start now.

Forward with coordinated policy

We can start solving this problem by facing future supply chain problems for chips and other components, including battery cells. Once a leader in the chip industry, US companies have largely restructured their business models to outsource production abroad. Now only two Asian companies, TSMC and Samsung, dominate 70% of the global chip market.

The White House has acknowledged the seriousness of this problem. President Biden signed a declaration on shortages, and the recently enacted law on infrastructure investment and jobs in two parties includes billions of dollars in research and grants to establish the supply chain’s resilience and support innovation and growth in domestic production. Nevertheless, Congress should complement these efforts by adopting the Build Back Better Act, which would ensure that we are in the best position to overcome future market instability.

Increased domestic supply is a start, but we also need coordinated government policies to persuade private companies to continue investing in domestic ZEV production and to encourage widespread transition in the short term. By moving forward with the adoption of policies such as the Advanced Clean Trucks Rule and incentive and discount programs, we can help ensure that the transition away from highly polluting trucks and buses remains on track.

In short, when the whole world is dependent on a handful of companies for essential parts, there are certainly periodic disruptions with far-reaching market impacts. Therefore, jurisdictions need to coordinate and plan ahead by investing in domestic production and incentive programs that will ensure that all new MHD trucks sold in the United States are zero emissions by at least 2040. Efforts are high and we can not afford to further delays in addressing climate, public health and equality impacts caused by MHD transport emissions.

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