The race towards electrification has suffered a bump in the road in recent months, with sales of battery-electric vehicles (such as the Toyota bZ4X) sliding as customers opt for more affordable hybrids and PHEVs. But this hasn’t stopped automakers from investing heavily, sinking billions of dollars into the EV transition. To assist smaller automotive companies, Monroe Capital LLC announced this week that it intends to launch a Drive Forward Fund of up to $1 billion that will assist smaller auto supplier companies with loans.
Per The White House’s official statement, the new fund will “facilitate access to lower-cost capital for small- and medium-sized auto manufacturers to refinance, grow and diversify their businesses.” The fund will be backed by a government-guaranteed low-cost lending system.
Much-Needed Help For Smaller Auto Industry Suppliers
This announcement comes as the United States government has made several changes to protect the local automotive industry. In May, the Biden Administration announced a 102% tariff on electric vehicles imported from China to “protect American manufacturers from China’s unfair trade practices.” Several automakers have also pleaded with the US Treasury to relax rules that intend to reroute EV component sourcing away from “foreign entities of concern,” namely China, Iran, Russia, and or North Korea.
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Naturally, this is a cause for concern, with automakers having to look for alternative parts suppliers while keeping costs down for cash-strapped consumers. To assist these companies, the US Treasury Department also said it will introduce a $9.1 million grant that will be used to launch the Michigan Auto Supplier Transition Program which will “help small and underserved automotive manufacturers and aftermarket suppliers secure financing to scale and shift to supplying the electric vehicle supply chain.”
“We believe this new Drive Forward Fund will be critical to catalyzing growth and innovation within America’s automotive supply chain. The Fund will have an opportunity to provide essential financial support to small and medium-sized businesses and will help provide a consistent and reliable supply chain to the Original Equipment Manufacturers (“OEMs”), Tier 1 auto manufacturers, and other auto industry stakeholders. In addition, the Fund will strive to provide support to auto industry suppliers as they become more competitive and remain local community anchors as they grow their businesses to support key initiatives within the overall automotive industry. Monroe Capital is honored to play a leading role in this new strategy.”
– Ted Koenig, Monroe Chairman and CEO
Essential For A Successful Move To Electrification
The program will also help smaller and underserved businesses with various support services (including legal and accounting), among other things. In a separate release, Monroe added that the new funds will help automotive businesses in what is a challenging but exciting time. This doesn’t only include investing in EVs, but also software-defined vehicles, smart factories, and autonomous driving technology.
Speaking to Reuters, John Bozzella, CEO of Alliance for Automotive Innovation, said the fund will enable smaller auto parts suppliers to gain access to much-needed capital that would allow them to modernize their operations. Bozzella added that a successful transition to electrification would require “a cutting-edge automotive supply chain that keeps the country competitive and underpins our economic and national security.”
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