As the world transitions to an electrified transportation fleet, the U.S. remains a wild card on electric vehicles and battery manufacturing, largely due to the political polarization gripping Washington, according to industry observers.

Within the last decade, emissions from the U.S. transportation sector have surpassed electric power generation to become the nation's top source of greenhouse gas emissions, according to data included in a January analysis of preliminary economic and energy data from consultancy firm Rhodium Group. Pandemic-driven lockdowns in 2020 drastically cut emissions across many parts of the economy, including the transportation sector.

That could be set to reverse as the world bounces back from the COVID-19 pandemic and travel increases. While EV sales are growing around the world, the U.S. has lagged China and Europe, largely due to comparatively weaker policy frameworks supporting EVs, S&P Global Market Intelligence analyst Alice Yu said during an April 27 webinar.

Right now, momentum for EVs and batteries in the U.S. is strong. President Joe Biden's $2 trillion American Jobs Plan includes $174 billion to build a national EV-charging network, which includes creating 500,000 charging stations. The legislation would electrify at least 20% of the nation's school buses and leverage government procurement to make EVs the bulk of federal transport.

In addition, states such as California have set aggressive fuel economy standards that are no longer threatened by litigation brought by the Trump administration. Strategies laid out by U.S.-based automakers such as General Motors Co. and Ford Motor Co. are dominated by new EV models, while international car companies such as Volkswagen AG have set ambitious EV sales forecasts for North America.

But these tailwinds might not last. World governments are wary of U.S. commitments to climate action after the Trump presidency sharply reversed an array of environmental regulations deployed under former President Barack Obama, including fuel economy standards for new automobiles. Efforts by the Biden administration to establish the U.S. as part of the global EV supply chain have yet to manifest in the creation of cathode production or battery manufacturing jobs.

If the policies already released by the Biden administration are enacted, the share of EV sales as a percentage of total automobile sales would reach 15% for light-duty vehicles, 20% for buses and 7% for heavy-duty trucks by 2030, according to a recent International Energy Agency forecast.

Can they build it?

Over the summer, this momentum will encounter the slow-moving grind of policymaking on Capitol Hill. Republican lawmakers generally oppose Biden's effort to fund a national EV charging network. And Democrats have not produced a method to pay for the infrastructure package's giant price tag nor agreed on what sorts of energy infrastructure should receive funding.

"There is no broad consensus among the American population that this is the direction we're taking," Emily Hersh said in an interview. "There is definitely a real fear or an expectation that all the work being done now could be undone or reversed." Hersch is a battery industry expert and managing partner of DCDB Research.

Depending on what policies are enacted over the next four years, it will become harder for the U.S. to turn away from the electric vehicle market, said BloombergNEF analyst Logan Goldie-Scot. But a key driver of market growth, EV charging infrastructure, has been tied up in the debate over passage of the broader infrastructure package.

"In the U.S., I think we are still waiting for policy statements to turn into policy action around electric vehicles," Goldie-Scot added. "It's moving in the right direction. Just not quickly enough."

Democratic fractures

Even some Democrats are reluctant to abandon the traditional internal combustion engine, which has been an economic bedrock in many parts of the U.S.

U.S. Rep. Marcy Kaptur, a Democrat who chairs the U.S. House Appropriations subcommittee on energy, represents an Ohio district that is home to heavy truck and transmission manufacturing facilities run by Ford and General Motors, the same companies proposing new investments in EV models. Kaptur said those facilities could be vulnerable to a massive shift toward EVs.

"If you're going to shake this up with an earthquake, you better retarget investment in those very places," Kaptur told Market Intelligence.

Kaptur plans to oppose legislation that expands EV deployment if the regulations do not address the economic impacts on conventional automakers and their suppliers. "We have to think about a strategic transition, and it's not going to happen in all places all at once," Kaptur said. "But I can guarantee you, for somebody representing automotive America, I don't want my people out of work."

State power

Fuel economy standards could also be an effective policy action to make EVs a sizeable chunk of U.S. auto sales. But the effectiveness of such mandates at the federal level will depend on how quickly they can be implemented — and how easily reversed. The Trump administration tried for years to undo Obama-era car efficiency standards, only to watch the government change course under Biden.

In that way, California and other states have played a "key role" in plowing forward by setting more stringent fuel economy standards than the federal government, Goldie-Scot said.

"U.S. federal policy may change, but half the U.S. states may actually be following a different rule that takes beyond one [presidential] term to change," Goldie-Scot added.

Hersh agreed on the importance of state policy when it comes to the future of EVs and battery manufacturing in the U.S., saying, "I'd love to see some congressional legislation on this, but I'd rather see more state level actors working to attract some of these big players globally, so when Congress is able to pass something, the rubber is able to meet the road."