Huge subsidy of $1.7 billion-U.S. Government Announces the Shortlist of Domestic Manufacturing Conversion Grant Program

The U.S. federal government has just announced the shortlist of the Domestic Manufacturing Conversion Grant Program (DMCGP). U.S. Department of Energy (DOE) is allocating around US$1.7 billion to support the transformation of 11 shuttered or at-risk automotive manufacturing and assembly plants in eight states to produce electric vehicles and build their supply chains.

This subsidy is targeted to the industry chain. For example, support for the only remaining firms in a particular field. Blue Bird Body Company in Fort Valley, Georgia, which received about US$79.73 million in grants. As the only homegrown school bus manufacturer and currently the largest electric school bus plant in the United States, it will use the grant to convert a brownfield site previously used for diesel motorhomes into a plant dedicated to producing EVs and other D-size school buses. At the same time, Bluebird will vertically integrate relevant suppliers in the region, facilitating a domestic supply chain for electric vehicle components.

Similarly, support for important companies in the manufacturing sector is also reflected. General Motors' Lansing Grand River Assembly Plant in Michigan received a whopping US$500 million. It will be converted into a plant to assemble electric vehicles and produce new electric models in the future. A Fiat Chrysler assembly plant in Illinois also received about US$335 million and will be converted into an electric vehicle assembly plant. Another transmission plant belonging to Fiat Chrysler in Indiana received US$250 million in subsidies. It will be used to produce Electric Drive Modules.

Form 1. Shortlist of Domestic Manufacturing Conversion Grant Program

Source: DOE

SMM observed that some of the plants on the published list, such as the Chrysler plant in Illinois, are already in a shutdown mode. Others are not in a good position to survive either. By applying the subsidy provisions under the Inflation Reduction Act, this subsidy strengthens the development of the North American EV industry chain to a certain extent. However, it is more of a support measure for North American auto plants that have been slow to transition and underperforming under the current wave of electrification. It should not be seen as a mere EV support policy.

In the DOE announcement, the subsidy's role in protecting jobs for industrial workers and sustaining industrial communities was explicitly addressed. Considering that most of the plants receiving the subsidies are located in swing states that were in the last election, politics is an important source of bias for the subsidies. The follow-up of this subsidy also remains to be seen.

Author: Yaoning Liu | Analyst Associate, Lithium Battery | London Office, Shanghai Metals Market

Email: edenliu@smm.cn