Electric-Vehicle Legislation in California – Third Time the Charm?
California’s new EV mandate intensifies affordability and charging-infrastructure concerns.
The official name is the “Advanced Clean Cars II” ruling and it effectively marks California’s third attempt to mandate the sale of electric vehicles in the state. As with the previous two efforts from the state’s influential Air Resources Board (ARB), the ruling that aims to eliminate sales of combustion-engine passenger vehicles by 2035 comes with a wealth of conversation and controversy.
But this time might be different. Rapidly advancing technology and an expanding global movement to address climate change have put EVs in a limelight they didn’t enjoy when the ARB issued its first two EV-related rulemakings, first in 1990 and again in 2012 (the ARB said the new ACC II regulation is “phase two” of 2012’s Advanced Clean Cars Program). In the early and mid-1990s, roadgoing EVs largely were shade-tree science projects, even after GM launched its seminal EV1 in 1996 and sold somewhere around 1100 units in its three-year run.
Now, however, EVs are not science projects and in 2021 in California, EV registrations comprised about 12% of passenger-vehicle sales, said the ARB. For its first objective, the Advanced Clean Cars II rule aims to nearly triple the state’s EV sales to 36% in little more than three years (see chart) – although the ruling does make provision for plug-in hybrid-electric vehicles (PHEVs) to count toward the sales goals. To qualify, EVs much have at least 150 miles (241 km) of certified driving range; PHEVs must have at least 50 miles (80 km) of electric-only range and cannot comprise more than 20% of any automaker’s sales to meet the zero-emissions requirement.
The reach of the new legislation is well beyond California. The ARB said states that currently follow California’s vehicle-emissions standards are expected to adopt ACC II via their own rulemakings. These follow-along states account for about 40% of the nation’s new-vehicle sales, according to the ARB.
Ultimately, California’s new mandate calls for 100% sales of zero-emissions light vehicles by 2035. “The timeline is ambitious but achievable,” the ARB said in its statement on August 25, 2022.
After variously siding with or opposing California and the federal government in recent vehicle-emissions tussles, most automakers – many of which are well underway with individual initiatives to transform their model ranges to electrification – reservedly supported California’s action. A sampling of responses:
“At Ford, combatting climate change is a strategic priority, and we’re proud of our partnership with California for stronger vehicle emissions standards, forged during a time when climate action was under attack,” said Bob Holycross, Ford’s chief sustainability officer. “We’re committed to building a zero-emissions transportation future that includes everyone, backed by our own investments of more than $50 billion by 2026 in EVs and batteries. The CARB Advanced Clean Cars II rule is a landmark standard that will define clean transportation and set an example for the United States,” he added.
American Honda Motor Co. said in an unattributed statement: “California’s proposed electric vehicle requirements represent an ambitious but important milestone in the future of clean mobility. Reaching these targets will require thoughtful collaboration between all parties in a number of key areas, including infrastructure buildout, the development of robust supply chains, and policy and market incentives. And while we fully share the goals of the recently revised federal EV tax credit, the reality is that very few to no electric vehicles will be eligible for this critical incentive in the near term. Today’s action by California makes it more important than ever for policymakers to enact complementary policies that will accelerate – not decelerate – the adoption of electric vehicles. Honda has a long history of working alongside the state of California, and we look forward to continued collaboration with the state and other stakeholders on the best ways to achieve our shared climate goals.”
The Alliance for Automotive Innovation presumably spoke for many of its members that include the BMW Group, Ford, GM, Honda, Hyundai, Kia, Jaguar Land Rover and several Tier 1 suppliers:
“Automakers are making massive investments in electrification – including manufacturing facilities and partnerships to produce vehicles, batteries and components inside the United States. This is a commitment that is producing game-changing EVs and transforming transportation,” said John Bozzella, AAI president and CEO.
“California today is about 18 percent EV market share and leading the nation which stands at 6.3 percent market share. Despite this positive trend, California’s EV sale mandates are still very aggressive – even in California with decades of supportive EV policies – and will be extremely challenging. That’s just a fact. Why? Whether or not these requirements are realistic or achievable is directly linked to external factors like inflation, charging and fuel infrastructure, supply chains, labor, critical mineral availability and pricing, and the ongoing semiconductor shortage. These are complex, intertwined and global issues well beyond the control of either CARB or the auto industry.
“What we’ve said to CARB and others is that getting more EVs on the road (a goal we unequivocally share and work every day to advance) must go hand-in-hand with other policies that together will ultimately determine the success of this transition. So the questions policymakers should be asking: are critical mineral and battery supply chains in place? Will the critical mineral mining and processing happen in the U.S.? Can customers afford the vehicles? Do all communities have the same access to Level 2 home charging as single-family homeowners? Resolving these questions will determine the ultimate success of the California regulations and the EV transformation.”
“Transportation is by far the largest cause of heat-trapping emissions in California and passenger vehicles are the single largest source,” said David Reichmuth, senior engineer in the Union of Concerned Scientists’ (UCS) Clean Transportation Program. “The new standards will drive down the tailpipe emissions that are fouling the air in California and fueling the climate crisis.”
Mandates versus sales
Several official statements reinforced the issues that struck at the heart of ARB’s earlier EV actions: wishing something to happen and mandating it do not constitute the full equation when dealing with consumer goods and market forces. In the 1990s, consumer demand and technology for EVs were not sufficiently mature. In 2022, the chief questions behind a significant and comparatively rapid shift in EV market share are affordability and infrastructure.
Although the average transaction price of new vehicles in July 2022 was a record $48,182, said Cox Automotive, the average price of an EV was up some 18% versus a year ago to more than $66,000. Also causing concern in the weeks surrounding the announcement of California’s EV action were price hikes on EVs from some manufacturers and still-increasing anxiety about prices for minerals and materials crucial to EV battery production.
Also affecting issues around EV pricing were provisions of the new Inflation Reduction Act (IRA) federal spending bill that set materials-sourcing and battery-manufacturing stipulations intended to strengthen and secure the battery-production supply chain. But by being tied to eligibility for significant consumer EV purchase rebates, many automakers believe the legislation ironically will make it more difficult, particularly in the near term, to leverage the rebates to ease EV cost for consumers.
Scrambling to industrialize
Even before the details of the IRA’s battery-sourcing provisions were known, several automakers were virtually racing to seal deals with the world’s most prominent EV battery developers to manufacture batteries domestically, as well as source the most critical of battery minerals, such as lithium, cobalt and nickel, either from North America or from world regions under free-trade agreement with the U.S. Passage of the IRA only cemented the political and economic will to address these crucial conflicts in the current battery supply chain.
With Ford, GM, Stellantis and Volkswagen among the largest automakers to secure multi-billion-dollar ventures with global battery developers such as SK Innovation, LG Chem, LG Energy Solution and Samsung SDI, among others, it appears complying with the IRA bill’s U.S. manufacturing provisions will be covered – although not immediately, as most of the facilities are under construction or yet to be started. Honda said just after the ARB’s announcement of the ACC II ruling that it inked a $4.4-billion deal with LG Energy Solution for a battery manufacturing plant of approximately 40 GWh capacity at a yet-to-be-disclosed location.
Battery quality and durability will be a crucial factor under the ARB’s new ACC II rule. By model year 2030, the rule says EV batteries must maintain at least 80% of electric range for 10 years or 150,000 miles (241,000 km). Starting with model year 2031, vehicle battery packs must be warranted to maintain 75% of their energy capacity for eight years or 100,000 miles (161,000 km).
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