For the first time, global automakers are rapidly moving their electric vehicle production to the U.S. and their battery supply chains out of China—and it’s no fluke. It’s in response to the Inflation Reduction Act’s electric vehicle tax credit, which gives consumers a $7,500 discount on EVs that are predominantly made with American parts on American soil.
You don’t have to just take our word for it. Earlier this month, the IRS released its updated list of models that meet the U.S.-made manufacturing requirements. Even though the requirements got stricter, more EVs met them—27 models, or two-thirds of the market by sales. That is because automakers are opening more U.S. plants to assemble them, and battery companies are opening more U.S. factories to supply them. Over 450 EV and battery companies have announced they are moving to America or expanding factories here since the passage of the Inflation Reduction Act. It’s happening: America is chipping away at China’s edge.
Meanwhile, the incoming Trump administration reportedly has set this reshoring policy in their sights. Those in favor of killing the tax credits have their reasons, ranging from the unserious (it’s an EV mandate!) to the self-serving (they’re coming for my market share!). Others are just skeptical of their importance.
Make no mistake: This tax credit is a key part of a larger strategy to position America to lead one of the fastest-growing markets in the world. If we throw our EV investments into reverse, competitors like China will win the race for the 21st century.
Let’s first put to rest any doubt that the future of transportation is electric. That’s not wishful liberal thinking; it’s a fact that any auto executive will tell you straight up. EVs already cost less to operate than gas-powered vehicles, and before we know it, they’ll cost less to make, too. In all 50 U.S. states, it is cheaper to charge your car than it is to fill your tank—in most cases, significantly cheaper. And while gas prices and supplies will always be tied to a geopolitical yo-yo, electricity will always be produced and price-controlled right here at home.
Let’s also be clear-eyed that China has a formidable head start in the EV race. They saw the writing on the wall early, and got to work building the supply chains, the manufacturing capacity, the charging infrastructure—and yes, the consumer incentives—to support now the largest EV market in the world. As a result, China builds as many EVs per year as the U.S. builds all cars.
Finally, let’s remember what we all agree on: We’re not ready to throw in the towel. We want American automakers, and American workers, to build the transportation of the future. But tariffs and protectionist trade policies alone won’t achieve that. We have to do the work here at home and match the scale of our competitors’ investments in their auto industries.
The Biden-Harris administration has taken that imperative seriously. We took an additive approach: creating manufacturing incentives that have made it irresistible for auto and battery makers to set up shop on American soil, and consumer incentives that have made their products irresistible for American families—while maintaining tough trade and tariff positions. And the results speak for themselves:
Over the past four years, companies have announced plans to build nearly 500 new or expanded plants for batteries, electric vehicles, and their supply chains and create more than 150,000 new jobs. America is on track to produce 21 times more lithium by the end of this decade—slashing China’s market dominance in half—and 18 times more battery cells. We’ve doubled the number of publicly available EV chargers, and more than doubled the number of EVs sold in all the years prior to 2021. And we haven’t just focused on passenger vehicles: The future of trucks, motorcycles, and school buses is electric, too.
All this amounts to a phenomenal start—but we still have a long road ahead of us.
Aggressive trade policy is a necessary complement to industrial strategy, which is why President Joe Biden has also implemented tariffs on Chinese EVs, batteries, and critical minerals. But if we’re going to stop investing in these industries at home, I’m curious what the plan is.
What’s the plan to lessen America’s dependence on foreign oil? What’s the plan to get out from under the thumb of the world’s petrodictators? It can’t be to simply drill, baby, drill—even if our supplies are domestic, prices are still dictated by global markets.
What’s the plan to futureproof the American auto industry? The EV share of the global auto market is growing steadily, and if U.S. companies can’t keep up, they will miss out on huge export opportunities—and risk falling even further behind their competition. (And just putting it out there: The evidence suggests the EV transition will create more, not fewer, auto industry jobs as we onshore the battery supply chain.)
More broadly, what’s the plan to build American dominance in the industries of the future—not just EVs, but also semiconductors, renewable energy, and AI? Or, invert that challenge—what’s the plan to break China’s dominance? Thus far, deindustrialization and laissez-faire economics have kept us on the back foot, while our competitors plowed ahead by investing in themselves. (On the flip side, since the IRA was passed, every $1 of federal spending has spurred $6 of private spending on clean technologies and transportation, to the tune of more than half a trillion dollars of total investment).
And what’s the plan to protect the American workers and communities already banking on those 500-plus factories? Many are in the very communities that lost manufacturing to offshoring—many of the workers, too, are the very same Americans who lost their jobs as a result. So, if their old jobs aren’t coming back, and their new ones don’t materialize, will these Americans be abandoned once again?
These are questions the incoming administration will have to answer. But make no mistake: The EV tax credit is one of many strategic investments in America and its future. If we start rolling it back, there’s a good chance we’re left eating China’s dust.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
