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A New Law Supercharged Electric Car Manufacturing, but Not Sales

A New Law Supercharged Electric Car Manufacturing, but Not Sales

President Biden’s signature climate law has stimulated a surge of investment in electric vehicle production across the country, including tens of billions of dollars on battery plants across the South and new assembly lines near the Great Lakes. Based on early evidence, it is succeeding at a goal that economists have long considered difficult and costly: using the power of government to rapidly grow a new industry.

That growth could prove crucial for the other side of the electric vehicle equation: enticing more consumers to buy them. That’s because Mr. Biden’s law effectively hitches the future affordability of electric vehicles to automakers’ willingness to source and build them in the United States.

For now, the climate law has not drastically affected trends in electric vehicle sales. Americans are poised to buy one million electric cars and trucks for the first time this year, continuing a steady trend of increased market share for electric vehicles that began years ago.

The law’s most pronounced immediate effect on the consumer market appears to be unintended: driving many electric car shoppers to lease vehicles instead of buying them. That’s because a Treasury Department regulation enables auto dealers to avoid the law’s made-in-America requirements for cars that they buy and then lease to customers. That allows shoppers to effectively reap the full benefits of the federal tax break for models that otherwise would not qualify.

Still, analysts say, electric vehicle sales are projected to jump sharply under the right conditions. Automakers would need to continue to invest in battery and assembly plants. Administration officials must speed the deployment of charging stations meant to ease the logistics of owning and driving an electric vehicle.

Mr. Biden is trying to jump-start the electric vehicle market as the global transition to cleaner fuels is accelerating more quickly than expected. That includes the switch to electric vehicles, which are a cornerstone of efforts to reduce emissions in the sector of the U.S. economy that emits the most greenhouse gases: transportation. Government policy missteps could slow or stall that growth.