Electric Cars: California’s Influence and Mass Market Appeal – 2/15/17

The market for electric vehicles (EVs) has so far been limited to those only taking short trips or wealthy enough to afford more expensive, longer distance models. That will soon change as California’s emissions standards rise and the new generation of EVs boasts lower prices and greater driving ranges

Currently, EVs make up just under 1% of new vehicle sales in the U.S., half of which occur in California with its state tax incentive, infrastructure, and several pockets of high-income, socially-conscious consumers. And while Washington may be ready to roll back environmental regulations, California exerts more influence over car makers than you might expect.

The largest car market in the U.S., California has its own rules mandating that zero-emission cars represent roughly 15% of sales by 2025. California has a waiver from the EPA that allows the state’s separate rules and forces auto makers to operate on the terms of California’s environmental regulators until at least 2025 when the waiver expires. California’s influence is a major reason why auto makers are developing electric cars and plug-in hybrids even though such vehicles are unpopular among buyers responding to low gas prices.

The people currently buying EVs tend to buy their cars as luxury items rather than necessities. Even when prices at the pump have risen in the U.S., shoppers tend to buy cheaper, smaller cars with conventional gas engines rather than EVs. That is why, overall, the EV adoption curve in Europe has far outpaced the rate of adoption in the U.S. though hybrids have made up most of the European purchases. It is also worth noting that European life in general requires less driving as most everything is relatively close together or accessible by train.

In Europe and the U.S., people make their purchases seeking to disrupt their lifestyles as little as possible. That is why plug-in hybrids that can switch to a gas engine outsell all-battery electric vehicles in Europe. And why Americans opted for cheaper, smaller cars with conventional gas engines when fuel prices started rising.

For the most part, people who’ve bought EVs in the U.S. are the type of people that treat cars like luxury items rather than necessities. EV simply haven’t been economically viable for most; however, the economics of EVs have changed rapidly in the last few years thanks mostly to plummeting battery prices. With the price of a major component dropping by more than half in less than 5 years, all-battery electric car prices can only go down, and fast.

The first electric cars with truly mass-marketable prices are coming in the very near future as Tesla begins distributing its Model 3 and the Chevy Bolt begins to hit the dealerships in earnest. Both all-battery EVs are priced at about $35,000 before tax incentives that bring the price down by thousands more. The models are also reportedly able to travel more than 215 miles on a single charge while American’s drive closer to 35 miles per day. For comparison, in 2014, the Nissan Leaf retailed at the same price with half the driving range.

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