Transportation

Electric Vehicles: The Path of the Future or a Jetson-Like Fantasy?

James Challou, MJLST Staffer

Last week President Biden contributed to the already growing hype behind electric vehicles when he heralded them as the future of transportation. Biden touted that $7.5 billion from last year’s infrastructure law, Public Law 117-58, would be put toward installing electric vehicle charging stations across the United States. This mass rollout of electric vehicle chargers, broadly aimed to help the US meet its goal of being carbon neutral by 2050, constitutes an immediate effort by the Biden administration to tackle pollution in the sector responsible for the largest share of the nation’s greenhouse gas emissions: transportation. The administration’s short-term goal is to install half a million chargers by 2030. However, not all are as confident as President Biden that this movement will be efficacious.

The “Buy America” Obstacle

Despite President Biden’s enthusiasm for this commitment to funding widespread electric vehicle charging stations, many experts remain skeptical that supply can keep up with demand. Crucially, Public Law 117-58 contains a key constraint, dubbed the “Buy America” rule, that mandates federal infrastructure projects obtain at least 55% of construction materials, including iron and steel, from domestic sources and requires all manufacturing to be done in the U.S.

Although labor groups and steel manufacturers continue to push for these domestic sourcing rules to be enforced, other groups like automakers and state officials argue that a combination of inflation increasing the cost of domestic materials and limited domestic production may hamstring the push towards electric vehicle charging accessibility altogether. One state official stated, “A rushed transition to the new requirements will exacerbate delays and increase costs if EV charging equipment providers are forced to abruptly shift component sourcing to domestic suppliers, who in turn may struggle with availability due to limited quantities and high demand.”

Proponents of a slower implementation offer a slew of different solutions ranging from a temporary waiver of the Buy America rules until domestic production can sustain the current demand, to a waiver of the requirements for EV chargers altogether. The Federal Highway Administration, charged with oversight of the EV charger program, proposed an indeterminate transitional period waiver of the Buy America rules until the charger industry and states are prepared to comply with requirements.

Domestic Manufacturer Complications

Domestic manufacturers are similarly conflicted about the waiver of the Buy America rules, with some thinking they may not be able to meet growing demand. While many companies predict they can meet Buy America production requirements in the future, the Federal Highway Administration specified in its waiver proposal that a mere three manufacturers, all based in California, presently believe they have existing fast charger systems that comply with Buy America requirements.

Predictably, the waiver proposal is divisive amongst domestic manufacturers. Some companies are onboard with the waiver and requested even more flexibility. This includes automakers like Ford and General Motors, who say that a process of moving all supply chains to the US demands more time, particularly at the scale necessary to match the surge in federal funding. This is largely seen as the most stakeholder friendly move as it offers companies the opportunity to use the duration of the waiver to see if a clear competitive market materializes which in turn benefits stakeholders.

Contrarily, others have asked for the waiver period to be shortened to allow them to quickly recoup their investments into Buy America compliant manufacturing upgrades. Some companies are even more aggressive; they oppose the waiver altogether and argue that the waiver would disadvantage manufacturers that intentionally put money into meeting the Buy America requirements. These companies posit that domestic manufacturing provides immediate benefits like augmenting supply chain security and electric-vehicle cybersecurity and warn against dependency on foreign governments for electrical steel needs. They further add that the Buy America rule will fuel growth in the US market and create manufacturing jobs. Labor groups and some lawmakers have adopted this stance as one lawmaker from Ohio commented, “[f]ederal agencies should implement the new Buy America provisions as quickly as possible to give American companies the certainty they need to move forward with investments.”

Other Implementation Difficulties

 The inclusion of the Buy America rule in this legislation is not the only aspect of the EV charging project that has generated considerable debate. Regional challenges pose more of an issue than originally anticipated. Although many states reported common potential hurdles like vandalism, range anxiety, supply chain, and electricity challenges, unique geographic problems have also arisen. For example, Nebraska reported in its plan that a shift to electric vehicles could decrease revenue collection from gas tax. Iowa aired out concerns about stations being hit by and damaged by snow plows. Michigan cited rodent damage as a potential concern. Finally, Oklahoma flagged political opposition to the chargers as a problem that could be both pervasive and fatal to the overall electric charging process.

Moreover, the law caught a substantial amount of flak for a curious decision to skip interstate rest stops when installing the EV charging stations. Although at first glance this would appear to be a pivotal oversight, it stems from a 1956 law that restricts commercial activity, in this case including electric car charging, at rest stops. The Federal Highway Administration, to alleviate these concerns, issued guidance that says electric vehicle chargers should be “as close to Interstate Highway Systems and highway corridors as possible” and generally no more than one mile from the exit. Furthermore, some of the older rest stops are excluded from the 1956 guidance. However, this is not enough to sate critics as many continue to fight for the 1956 law to be changed. They claim that the existence of the restriction drastically inconveniences drivers, planners, and vehicles while potentially creating a wealth disparity by forcing low-income families, who traditionally rely more on public rest areas, to avoid purchasing electric vehicles.

Conclusion

President Biden deserves to be lauded for his ambitious plan for electric vehicles which attempts to square combating the effects of climate change with preserving American manufacturing while simultaneously improving infrastructure. It is worth questioning whether the law would be more effective if it simply focused its efforts on one of these areas. As a commentator at the Cato Institute noted, “The goal of infrastructure spending should be better infrastructure — and if you’re trying to pursue policies to mitigate climate change, well that should be the overall goal … Anything that hinders that should be avoided.”  Only time will reveal the answer to this question.


Boeing Bailout: 737 Max Crashes and the Coronavirus

Bernard Cryan, MJLST Staffer

Boeing Overview

Boeing plays a major role in the aerospace industry—both domestically and internationally. Boeing employs over 160,000 people worldwide and had a revenue of $76 billion in 2019. According to Forbes’ 2019 Fortune Global List, Boeing is ranked as Fortune 100 company. In fact, Boeing is America’s largest manufacturing exporter. Boeing’s business operations are organized into three units: Commercial Airplanes; Defense, Space & Security; and Boeing Global Services. Boeing’s Commercial Airplanes division is responsible for producing “almost half the world fleet” with more than 10,000 Boeing-built jetliners in service worldwide and “about 90% of the world’s cargo is carried onboard Boeing planes.”

737 Max Crashes

Boeing’s popular commercial airplane—the 737 Max—was recently involved in two deadly crashes. In October 2018, 189 passengers were killed on a Lion Air flight taking off from Indonesia. Again, in March 2019, 157 passengers were killed on an Ethiopian Airlines flight just minutes after takeoff. In response, Boeing grounded all 737 Max airplanes around the world and created a $100 million relief fund “to meet the family and community needs of those affected by the accidents.” Nevertheless, Boeing has received harsh criticism and scrutiny over deficiencies in its product and training. The 737 Max airplanes are still not cleared to fly causing Boeing customers to revise or even cancel orders. Certain airlines have also demanded compensation from Boeing for flight cancellations that resulted from the grounding of 737 Max airplanes. Boeing’s stock price fell after the crashes and Boeing’s revenue fell from $101 billion in 2018 to $76 billion in 2019. Boeing even replaced its CEO after he was unable to stabilize the company following the crashes. In sum, the 737 Max crashes have forced Boeing into a vulnerable financial position.

Coronavirus

The recent COVID-19 outbreak has posed additional challenges for Boeing and the entire aerospace industry. Boeing has publicly acknowledged the struggles of the entire industry caused by the coronavirus. For example, coronavirus’ impact on travel has forced American Airlines to fly its first cargo-only flight in 36 years. Boeing is directly impacted by the coronavirus because struggling airlines are not currently in the position to place orders for new airplanes.

Government’s Response

Although there is fierce competition amongst airlines, there is little competition in the manufacture of commercial airplanes. Boeing and Airbus, a European company, are the two main global suppliers of large commercial aircraft and have almost complete market power. President Trump has recognized Boeing’s indispensable role in keeping America competitive in the global industry and has recently stated, “Yes, I think we have to protect Boeing. We have to absolutely help Boeing.” Boeing has publicly expressed support for the government’s plan to bailout the aerospace industry.

Boeing is requesting a bailout of the aerospace industry in the amount of $60 billion. Boeing has suspended paying dividends and CEO Dave Calhoun has given up his pay temporarily. Additionally, United Airlines has threatened to cut jobs if the bailout relief is not passed by Congress. The aerospace industry wants help from the government. Some, however, caution against using the term ‘bailout’ for this type of situation because the airlines did not cause the hardship resulting from the coronavirus. Although Boeing and the airlines are not responsible for the coronavirus, they are at least partly responsible for their current inability to survive through these challenging times—Boeing and the airlines have spent billions of dollars in recent years buying back their own stock. For example, airlines have spent $42.5 billion on buy backs between 2014 and 2019 which is almost identical to the amount the industry is now requesting from the government.

The Bailout and The Takeaway

A government bailout can be in the form of legislation providing money or resources to a company or even an industry to help that company or industry avoid bankruptcy. For example, Congress approved a $15 billion bailout to the airlines in response to the 9/11 terrorist attacks. Another example is the Emergency Economic Stabilization Act of 2008 where the government provided bailout relief to banks after the mortgage crisis. AIG initially received an $85 billion loan (later receiving more money totaling $150 billion) from the Treasury in exchange for 79.9% equity in AIG. The loan was to be repaid with interest; the U.S. government and taxpayers eventually made $22.7 billion from interest payments.

A government bailout of the aerospace industry appears imminent. Boeing is likely to be considered “too big to fail.” The main questions are how much money will go to Boeing and the aerospace industry, in what form, e.g., debt or equity, and what strings will be attached to that money. Will the government acquire some ownership of Boeing as they did with AIG? Boeing CEO has said Boeing may reject any relief from the government if the government demands stake in the company. Will Boeing be required to change any of its Commercial Airplane division business practices? Will there be more government oversight of Boeing’s operations? Will Boeing be required to cut emissions from its planes to help protect the environment? The aerospace industry bailout will be interesting to monitor as things should come together quickly in the next few weeks, or even days.


Electric Scooter Regulations in Winter: Why the “Brake” in Service?

Warren Cormack, MJLST Staffer

In the summer of 2018, the city of Minneapolis began a pilot project to introduce 600 electric rental scooters, primarily to the downtown area. The city approved operations for Jump, Lyft, Spin, and Lime in 2019. Two thousand scooters were slated to hit the Minneapolis streets, but the companies deployed less than one thousand to Minneapolis for much of the 2019 season. Still, half a year ago, ride-share scooters from the 2019 authorization could be found all over the streets of Minneapolis and users “racked up about 225,000 rides.”

Minneapolis is a city with a strong winter biking tradition. Yet in February, with winter in full swing, electric scooters are nowhere to be seen. What happened?

The short answer is that Minneapolis’ second pilot program for electric scooters ended in November 2019. When we dig deeper, though, some interesting dynamics affect the use of electric scooters in winter.

Though scooter companies initially targeted warm-weather cities, now colder cities like MilwaukeeBoston, and Minneapolis face challenges associated with operating electric scooters in colder weather. For example, when snow emergencies hit, cities may have to ask companies to remove scooters from the roads.

An important concern for cities is safety. This was a major reason why Minneapolis ended the 2019 scooter pilot in late November. Minneapolis scooter companies agreed that 6 to 10 inches of snow was too much to operate safely. Scooter companies are already being sued for the injuries that they cause, and the odds that someone might injure themselves while riding on snowy ground is higher than when the streets are clear. Still, scooter companies have shown a desire to keep their scooters running unless a winter storm hits.

Though Denver’s weather is not as cold as Minneapolis, it does snow there. Denver’s scooters arrived in May 2018 and the city regulated their numbers within two months. Still, the city did not regulate the months within which the scooters would be available for use. A spokeswoman for Denver Public Works reportedly said: “I think riders are going to have to make their own choices if they want to ride an electric scooter in the winter months.” Denver’s comparable warmth may affect how the city balances safety concerns.

The cold weather is not only an issue for riders. “Scooter companies are still learning how their vehicles perform in various weather conditions and from regular use.” Scooters generally either operate on bike lanes or sidewalks. In either location, the small wheels and limited batteries of scooters can negatively impact their winter-weather suitability. The major scooter models currently in use have minimum operating temperatures of fourteen degrees Fahrenheit. Possibly in response to the limits of popular scooters, Bird (one of the major scooter companies) designed a scooter with more battery and pronounced tire treads. Tier is another company developing scooters that can handle cold weather. The effects of winter may be over-hyped, however. According to a scooter expert, scooters may become slower during the winter, but the cold does not damage their battery.

A final winter issue is simply a lack of riders. Even for European scooter companies that operate throughout the year, about half of the riders stop riding during the winter. Minneapolis data also reflect a roughly 50% decrease from summer’s peak to November. College riders leave home for winter break, prompting companies to reduce the number of deployed scooters. A lack of winter riders caused Lime to ramp down operations in Milwaukee. Though riders in relatively snowy cities like Denver have found that people use scooters through the winter, scooter companies facing higher maintenance costs and lower ridership may be wise to reduce their fleet size.

Scooters may leave for the winter due to safety, maintenance, or lower ridership. This may be caused by city policy or by the companies themselves. If the companies continue to make their scooters more capable of enduring the winter, cities may begin to find themselves at odds with electric scooter companies’ desire to stay open for business.