It’s becoming increasingly clear that China has taken a commanding lead in the global race for electric vehicle and battery innovation. With the U.S. Department of Energy (DOE) pulling back on major Biden-era grants, that gap could widen even further

In early October alone, the DOE canceled more than $700 million in awards meant to boost domestic battery and manufacturing projects. The timing and scale of these cancellations have sparked frustration across the industry and in Washington alike.

Behind the scenes, reports suggest this may only be the beginning Recently, a list of projects reportedly being targeted by the DOE has been circulating among lobbyists, indicating that as much as $20 billion in awards could be scrapped.

Included in that list, and recently confirmed by the DOE, were $700 million in grants awarded under the previous administration for battery makers Ascend Elements, American Battery Technology Co, Anovion, and ICL Specialty Products. There was also a grant for glass manufacturer LuxWall.

What’s Behind The Cancellations?

In a statement, DOE spokesperson Ben Dietderich said the projects “had missed milestones, and it was determined they did not adequately advance the nation’s energy needs, were not economically viable, and would not provide a positive return on investment of taxpayer dollars.”

Read: Washington Could Break Biden’s $1.1 Billion EV Promise To GM And Stellantis

As noted by Politico’s E&E, the cancellation of these grants impacts plans to build large factories in states including Missouri and Kentucky.

Of the $700 million in grants, $316 million was awarded to Ascend Elements to support manufacturing components from recycled EV batteries at a $1 billion plant in Kentucky.

Additionally, $57.7 million was bound for American Battery Technology to support the construction of a Nevada plant producing lithium hydroxide for batteries. Elsewhere, $117 million was awarded to Anovion to support the production of synthetic graphite for lithium-ion battery anodes.

Energy Secretary Chris Wright is believed to be spearheading many of the cancellations, noting that “If they’re not in the interest of the taxpayers, if they’re not a good expenditure of the money, you always have the ability to cancel these projects.”

Democrats Hit Back

Unsurprisingly, Democrats quickly voiced their opposition. In a strongly worded letter to Wright, 37 Democratic and independent senators accused the DOE of overstepping its authority.

“The illegality of your cancellations is the only thing as indisputable as the harm your cancellations will wreak,” the letter stated. Lawmakers argued that the department “must expend these funds and faithfully execute the law, including many programs that have strict requirements for the timing of fund expenditure, purposes, and contractual expectations.”

Under the Biden administration, carmakers enjoyed four years of predictable policy and a clear push toward electrification. Since 2005, some form of tax credit has existed to reward buyers of low-emission vehicles. Then came January.

Donald Trump’s return to the Oval Office promptly threw a wrench into that setup, with his administration scrapping the EV tax credit, lifting penalties for exceeding emissions targets, and generally adopting an anti-EV posture that left automakers recalibrating overnight.

Now, car manufacturers are facing an uphill climb. Following the removal of the federal EV tax credit at the end of September, General Motors says it has already seen a “significant” decline in demand. Even so, the company expects things to settle into a more predictable rhythm soon enough, lbeit at a lower pitch than before.

Read: EV Tax Credit Loss Will Cost GM $1.6 Billion

“EV demand is going to be pretty choppy for the near future, we think, as we come out of the $7,500 and what we’ve already seen in October with some pretty significant pullback in demand,” GM chief financial officer Paul Jacobson said during a recent earnings call. “We do think that the EV market is going to stabilize from a supply standpoint.”

Jacobson added that emissions regulations had turned parts of the EV market into a clearance aisle, with some brands practically giving away electric cars just to rack up environmental credits.

“We had a number of competitors out there that really were selling EVs for whatever they could get for them because they really wanted to get the credits on the environmental side,” he said.

While he didn’t call anyone out by name, Jacobson was referring to the regulatory credits automakers could earn from selling EVs under the previous scheme. If they failed to bring about enough credits or didn’t purchase them from a brand like Tesla, they faced fines.

GM’s EV Future

Moving forward, GM appears confident in the future of EVs. Chief executive Mary Barra refers to them as the company’s “North Star” and said the company won’t “know what true EV demand is” until early next year.

Despite the uncertainty, GM doesn’t plan to discontinue any of its current models and will focus on reducing costs over the coming years. For example, it’s working on reducing complexity and commonizing parts across its dedicated EV platform.

“We’re [also] investing in new battery technologies, LMR (lithium manganese rich), that will allow us to take cost out of the vehicle in a significant fashion,” said Barra.