Thursday's insights: Winners and losers in Biden's new EV pledge

Plus, EV sales outpace hybrids in second quarter; and the downside of the Democrats' plan to tax fossil fuel giants

. . . . President Joe Biden, surrounded by automaker bigwigs and union chiefs, announced today that he is restoring and bolstering emissions regulations and setting a 2030 target that half of vehicles sold in the U.S. will be electric-powered. “When I say electric vehicles are the future, I’m not joking,” Biden said. What will that future mean for the various components of the auto industry? A snap analysis:

  • As EV sales go, so goes growth in charging stations, which will likely be bolstered by the $7.5 billion set aside in Biden’s infrastructure bill once it is approved by Congress. Top charging station stocks include Blink Charging (BLNK), ChargePoint (CHPT), and TPG Pace Beneficial Financial Corp (TPGY).

  • Carmakers are likely to see higher profits as EVs are cheaper to build. Being simpler mechanically, they require fewer workers (by some estimates, only a third of those needed to build gas-powered cars or trucks). At the same time, consumers at least currently perceive them to be somewhat of a luxury item and are willing to pay more.

  • Which means that labor unions, notably the United Auto Workers, are likely to see their memberships drop. “The U.A.W. focus is … on preserving the wages and benefits that have been the heart and soul of the American middle class,” said Ray Curry, the U.A.W. president. With this scenario, get set for tough negotiations and, perhaps, assembly line disruptions, once the photo opps at the White House are over.

  • On the other hand, EV innovations are going to create an expanded supply chain for parts, particularly in the battery industry and in the production of the mining materials that make it up. Get ready for more jobs (and business opportunities) there.

  • The change may provide a bigger chance for foreign car manufacturers, notably from China, to expand in the U.S. market. To a certain extent, U.S. automakers have been protected by Americans’ predilection for pickup trucks and large SUVs, most of them American-made. A switch to EVs will threaten that.

  • At the same time, as we reported, China has been busy building EV factories, with one manufacturer, Evergrande (EGRNF), even pledging to make almost as many electric cars by 2025 as are built in all of North America. With high volume and, more important, low labor costs, its less-expensive vehicles will be hard to resist.

  • Big Oil will face a bashing. For instance, ExxonMobil (XOM), according to The Wall Street Journal, is considering a pledge for net zero carbon emissions by 2050. It will be helped in that aim, of course, by fewer gas-guzzlers on the road. And less gas being pumped means lower profits.

These changes have been forecast ever since Biden was elected, and deliver much-needed momentum to his administration’s climate promises, at a time when concern over the infrastructure bill and his proposed new electricity standards were starting to hurt the U.S.’s international climate credibility. . . .

. . . . Global warming-induced weather disasters keep getting worse. In California, extreme drought conditions have forced the state to cut off water from agricultural consumers in the Sacramento-San Joaquin Delta watershed, according to The Los Angeles Times. Overnight, the raging Dixie wildfire destroyed most of the Gold Rush town of Greenville in the northern Sierra Nevada. Meanwhile, forecasters are predicting an increasingly busy hurricane season. And all that, of course, is just in the U.S. Worldwide, especially in poorer countries, the threats are even greater. Here are some winners and losers:

  • Farmers and food consumers. As reports, searing droughts and massive floods are devastating agriculture. For example, Argentina, a major grain and meat producer, is experiencing a drought that has, as one environmental lawyer described it, “a veritable environmental holocaust.” Meanwhile in China, the Henan area, a major crop region, was hit by a year’s worth of rain in just three days, killing more than 70 and deluging 2.4 million acres. And back in California, the state’s huge tomato industry, which grows more than 90% of the U.S.’s canned tomatoes, has been hard hit, with prices for your spaghetti sauce likely to soar.

  • The risk business. With weather worsening, the future of the risk forecasting industry looks bright. For instance, reports ESG Today, risk assessment company Moody’s (MCO) just bought RMS, a leading provider of climate and natural disaster risk modeling and analytics that serves the insurance and reinsurance industries. The price? An eye-popping $2 billion. As Rob Fauber, president and CEO of Moody’s said, “our customers must manage a wider range of risks than ever before.” No kidding.

  • The insurance business. It’s a mixed bag. On one hand, insurers keep reminding customers, even those seemingly out of bad-weather zones, to add flood, wind and wildfire coverage, thus increasing premiums (and profits); on the other, the likelihood of wilder and wilder weather bolsters their risk (hence today’s Moody’s/RMS deal). This will be a sector worth watching, both for opportunities and upset.

  • And finally, ever think that air purifiers would be a big deal? They are now, reports Bloomberg. First, it was Covid; now it’s the smoke from Western wildfires, with sales increasing 57% in 2020 and the market expected to expand almost 30% this year, according to research firm Verify Markets.

Take a deep breath. . . .

. . . . Still rattling around the court system, as we reported in May, are lawsuits by about 15 American cities, states and counties seeking major compensation from Big Oil for pollution-caused damage. Now, reports The New York Times, Democrats in Congress want to turn up the heat at the federal level, using taxes on such companies as ExxonMobil (XOM) and Chevron (CVX) to pay for environmental harm linked to the burning of fossil fuels. The draft legislation would task the Treasury and the EPA with ID’ing the companies that released most greenhouse gases between 2000 and 2019 and impose a fee based on those emissions.

The focus on the fossil-fuel giants, however, leaves the less-highlighted offenders to largely continue their polluting ways. Steel manufacturers, for instance, pump out about 9% or the global pollution total. Meanwhile, as we reported, shipping, with its belching boats crisscrossing the globe, accounts for about 4% of the total. And the manufacture of concrete — the world’s most prolific product after water — contributes about 8% of CO₂ emissions.

And then there are buildings. Quite apart from their large use of concrete, they remain very much unchanged in construction techniques, except a relatively small number of LEED-certified examples, such as the one at the top of this report.

They use huge amounts of energy to be heated and cooled, much of which escapes through walls, roofs and overall lax building methods. In that regard, cities and states around the U.S. are looking to ramp up efficiency regulations, which are governed by a patchwork of rules, and are often heavily influenced by a building industry focused on fast profits over green solutions.

“The place that we are working right now is to get a better (nationwide) code on paper,” Kim Cheslak, director of codes at the non-profit New Buildings Institute, told Inside Climate News.

As the climate emergency grows, the ER term “stat” seems appropriate across all these sectors. . . .

. . . . As we reported on Tuesday, a tipping point for electric vehicles sales in the U.S. appears to be nearing as America chases Europe and China in embracing EVs. And new numbers bear us out: In the second quarter, EV sales jumped 201.1% as total new-vehicle sales increased by 49.5%, according to Kelley Blue Book. In addition, sales of pure electric cars grew at a faster pace than those of hybrids and plug-in hybrids. Americans bought 258,028 hybrids and plug-in hybrids in the second quarter of 2021, compared to 91,667 in the first quarter of 2020, a 181% increase. Meanwhile, they bought 118,233 EVs, compared to 33,312 last year, an increase of 254.9%.

That’s the good news. The bad is that manufacturers have been plagued by shortages of computer chips and ingredients for EV batteries, leading to manufacturing slowdowns and shutdowns at a time when demand for vehicles is unprecedented. But in terms of batteries, where materials such as lithium, cobalt and nickel are proving hard to source, good news is on the horizon. And it comes, reports TechCrunch, from the EV king himself, Elon Musk, who said that Tesla (TSLA) is making “a long-term shift” toward older — and cheaper — lithium-iron-phosphate (LFP) cells. Yes, iron. Just like in the battery that starts up your gasoline car.

Musk is not alone. Earlier this year, Ford Motor (F) CEO Jim Farley said the company would use LFP batteries in some commercial vehicles and Volkswagen (VWAGY) CEO Herbert Diess that LFP technology would be used in some of VW’s entry-level EVs.

Yes, sometimes everything old is new again. . . .