The Electric: Beware the Pitfalls of a Subsidized EV and Battery Industry

For years, U.S. economists, politicians and pundits have denigrated China’s battery and electric vehicle industries, suggesting that because the government has subsidized them, they are somehow mere inventions and not real. Now the U.S. itself is aggressively pursuing the subsidy path to industrialization, arguably conceding that China has been right all along. Congress has marshaled some $250 billion in tax credits, grants and loans for the EV and battery industries. And last week, the Biden administration doubled down, proposing new tailpipe emissions rules in a quest to electrify two-thirds of new U.S. vehicle sales within a decade.

The U.S. initiative is exceedingly ambitious, assembling American allies into a consortium that it hopes will collectively compete with the EV and battery industries that China has spent a dozen years building. But a question remains: Will the subsidies work?