The situation: In December 2021, the Biden administration placed more emphasis on the rapidly evolving alternative vehicle industry by releasing its Electric Vehicle Charging Action Plan.
The result: The plan aims to increase the market share of battery-electric, plug-in hybrid and hydrogen-electric (“EV”) vehicles, amplify the US charging network and increase manufacturing in the United States.
Look forward: Strategic alliances will proliferate, based on large-scale fleet conversion, an influx of capital into electric vehicle innovation and consolidation, and substantial cross-industry capacity development. These transactions provide market leading opportunities for targeted participants.
Electric vehicles have been in the headlines this quarter, and with good reason. The December 2021 Biden-Harris Electric Vehicle Charging Action Plan accelerates the conversion of internal combustion vehicles to a range of EV powertrains. The plan targets electric vehicles as 50% of all new cars in 2030, with a set of incentives to allow domestic manufacturers (“OEMs”) to move electric vehicle manufacturing to the United States.
The administration’s efforts to support OEMs reflect the rapidly changing scope, scale and scale of the electric vehicle industry. Current electric vehicle buyers are challenging outdated stereotypes about adopters of zero and low carbon technologies, for example, NASCAR will go hybrid in 2024. In 2020, the global stock of electric vehicles exceeded 10 million passenger vehicles, with significant fractions of the EV market share in Europe (>10%) and China (>8%). The sales trend in 2021 is 7% of global sales, with 18 of the top 20 OEMs committed to increasing electric vehicle offerings and sales. KPMG’s annual Global Automobile Executive Survey indicates, as a “megatrend”, that 98% of automotive executives surveyed see sustainability as a “key differentiator”, based on the shift to electric vehicles.
What does this mean for the private sector and industry legal teams in particular? We all learn. Nonetheless, after more than a decade of working with pioneering electric vehicle developers, companies and service providers around the world, we can identify a number of key considerations for those who (ad)venture into this space :
Strategic partnerships: Large-scale fleet conversions to electric vehicles, which began in earnest in 2018, are accelerating around the world. Our continued work for our customers, especially pioneering early adopters of $1 billion+ commercial fleet conversions, may continue to reflect the frontier of the industry, but not for long. The commercial electric vehicle sector is changing rapidly, even beyond the Biden administration’s U.S. fleet conversion goal of about 645,000 vehicles. These strategic, collaborative and IP-intensive initiatives to advance new vehicles and integration systems are pioneering and, in our experience, benefit from well-designed “pilot” strategies and processes throughout the conversion roadmap. .
Municipal planning: Class A property owners have driven the early adoption and integration of electric vehicle charging stations in mixed-use developments – the four to eight spaces right next to the elevator. This conversion process is now accelerating in the middle market, in addition to being widely deployed by municipalities, with their often central locations and the underappreciated advantages that sovereignty offers for project development. Our experience from extensive work in this area underscores the importance of identifying and advancing a development plan that addresses potential barriers to system ownership, functional project deployment, and the rights of the charging public. Incentive, subsidy and tax policies for electric vehicles are essential, but have quickly become normalized across the industry, becoming more of a practical necessity than a long-term competitive advantage. Now may be the time to fill the gaps in incentive expertise.
Electrical infrastructure: Charging stations are large consumers of electricity, with non-utility ownership and regulatory status, interconnection delays, and demand charges among key legal and business considerations. Delays in the integration of electrical infrastructure may tip the balance towards “behind the meter” projects or micro-grids. Equally important, but too often overlooked, are the legal rules relating to monetary charges for the use of electricity (which require an understanding of electricity tariff design and grid stability considerations), as well as the rights to important data and information that connected EVs generate. . Billing rules and cybersecurity risks remain multifaceted items on the checklists of any legal team.
Battery storage: Driven by both renewable supply targets and time-of-use pricing variables, charging vehicle owners are turning to battery storage. These projects can be challenging, especially due to design, siting and construction considerations associated with rapidly changing technologies and battery storage in particular. Our experience in advising on implementation and litigation (including in connection with grants and loan guarantees) related to the development of large-scale battery storage projects, suggests that what can be considered as Routine contractual considerations, ranging from dispute resolution to taxation, deserve particular attention. .
Supply Chain: The problems of supplying raw materials for batteries, in particular phosphorus, nickel, cobalt and lithium, have been widely discussed. We suggest that public dialogue around resource constraints will drive metallurgical (or elemental) innovation, including recycling and the shift to hydrogen or fuel cell electric vehicles. Hydrogen is appealing to the heavy and long-haul end of the sector, also offering easier integration into existing transport infrastructure and a familiar “look” for customers. Thus, we continue to suggest clear reservations of rights to alternatively develop or generate hydrogen.
ESG: Finally, no summary would be complete without mentioning the role of electric mobility in our broader ESG discussion. Electric vehicle buyers, especially fleet buyers, need or want to understand their contribution to reducing CO2 and other emissions. Cradle to grave – or, in the circular economy, cradle to cradle – measurement, labeling and reporting is an important frontier for participants in electric vehicle markets, a frontier that can overshadow the attention of the today’s commercial consumer on battery degradation, range, acceleration and power.
Electric vehicles weathered the initial COVID storm well. However, we have a long drive before sleeping.
- The optimization of public capital and incentives will take place over the next six to 12 months, in line with the Biden administration’s commitments to advance the electric vehicle industry in the United States.
- Now is the time for internal legal teams to grow their strategic alliance teams, focused on building successful contractual relationships, meeting federal procurement standards, capturing tax and other incentives, while managing the electricity, cybersecurity and ESG considerations.
- Despite this focus, issues related to electric vehicle charging stations and batteries are likely to be among the most important – and potentially complicated – as the sector develops. Litigation expertise remains essential.