New rules will still push automakers to sell more electric cars

Although the air quality rules announced Wednesday in Washington are less strict than some environmentalists would have liked, they are still expected to have a powerful effect on the types of cars that appear in showrooms over the next few years. years, experts estimate.

The rules will amplify market forces pushing the industry toward battery power, giving automakers a strong incentive to sell a wider, more affordable variety of electric cars — not just the pricey sport-utility vehicles that have dominated sales until 'now.

“That probably means more models and lower prices,” said Craig Segall, former deputy chief executive of the California Air Resources Board, an agency that has played a key role in promoting electric vehicles in the state. “The way you win,” he said, referring to automakers, “is by making sure you have an electric vehicle in every segment.”

Despite rumors of a slowdown, sales of electric vehicles are growing much faster than those of fossil fuel vehicles. Electric vehicle prices have fallen significantly and are expected to fall further as automakers improve their manufacturing and the cost of batteries and raw materials fall.

The Environmental Protection Agency rules announced Wednesday “certainly do not slow the pace at which our members are increasing production,” said Albert Gore III, executive director of the Zero Emission Transportation Association. The association's members include Tesla and other electric car makers, as well as battery makers, charging companies and suppliers.

The Inflation Reduction Act, passed by Democrats in 2022, led to a boom in investment in battery and electric vehicle factories. Since then, companies have announced investments of more than $110 billion in battery and electric vehicle assembly plants, according to the Environmental Defense Fund. These are long-term financial commitments that businesses are likely to meet regardless of what the federal government does.

Within a few years, electric cars capable of traveling more than 300 miles on a charge will likely cost less than gasoline vehicles, even before factoring in fuel savings. Electricity is generally much cheaper than gasoline. This will give more car buyers strong economic reasons to go electric.

The average price of a new electric vehicle has fallen significantly. It was $52,314 in February, according to Kelley Blue Book, still about $5,000 more than the average for all vehicles. But electric vehicle prices fell 13% in February from a year earlier, and by more than $2,500 from January alone. The cost of used battery-powered vehicles has fallen much more than that.

Prices will continue to fall sharply as batteries, the largest and most expensive component, become cheaper and cheaper, analysts say. The average cost of a battery is on track to fall more than 40% by 2030 compared to 2022, according to estimates from the International Council on Clean Transportation, a research organization.

Electric vehicles are “getting closer to parity with gasoline cars,” said Katherine García, a transportation expert at the Sierra Club. “We're going to see this sooner than we initially expected. »

In the first years of the EPA rules announced Wednesday, automakers will face slightly less pressure to reduce emissions than under an earlier proposal by the agency. The EPA does not dictate to automakers how they meet the standards. They can also reduce emissions by improving the efficiency of gasoline engines or selling more hybrid cars that supplement gasoline engines with batteries and electric motors.

Plug-in hybrids, which can travel short distances on battery power alone and are growing in popularity, could proliferate in the coming years. They will account for up to 9% of new car sales by 2030, according to EPA estimates, up from about 2% last year.

But automakers will get the most credit for all-electric cars that produce zero tailpipe emissions. They will represent 44% of new cars by 2030, according to the EPA.

Longer term, most automakers recognize that they need to sell attractive electric vehicles to survive.

“Electric vehicles are clearly the future, what consumers will want and what will be cheapest to produce,” said Stephanie Searle, program director at the International Council on Clean Transportation. “Automakers need to invest in this area to keep pace.”

Tesla has already shaken up the automobile market and become the most valuable automaker in the world. New Chinese competitors are looming, as Beijing attempts to take advantage of technological change to become a major auto exporter.

Tariffs and other restrictions have so far limited Chinese exports to the United States. But automakers like BYD, which sells an electric car in China for less than $12,000, could find a solution by producing in Mexico or even building factories in the United States.

For car manufacturers, the emergence of Chinese competitors constitutes a powerful motivating factor. It brings back unpleasant memories of how Toyota, Honda and other Japanese automakers broke the dominance of Ford Motor, General Motors and Chrysler in the 1970s with cheap, fuel-efficient cars. Tesla, Ford and Volkswagen are among the major automakers working on low-cost electric vehicles, clearly inspired by the Chinese threat.

Experience has shown that technology often evolves faster than regulations require. Under EPA rules that took effect in 2017, electric vehicles are expected to account for 3% of new car sales by 2025. But battery-powered cars already make up about 8% of the U.S. new car market.

In California, which has long had the strictest pollution limits, electric cars accounted for 25% of new cars sold last year. And under rules adopted in 2022, the state will phase out cars using fossil fuels by 2035.

“California has more than its share of electric vehicles because we asked for them,” said Mr. Segall, the former state official who is now vice president of Evergreen, an activist group.

Twelve other states, including New York and New Jersey, model their rules after California's and will not be affected much by the EPA's regulations because their rules are already stricter. The federal rules will have the most impact on states like Texas, Florida and Connecticut that don't follow California.

The rules will also put pressure on automakers like Toyota and Stellantis, owner of Chrysler, Dodge, Ram and Jeep, which have been slow to sell fully electric vehicles.

The EPA rules are among several Biden administration policies intended to promote electric vehicles. Tax credits of up to $7,500 are available for vehicles manufactured in the United States, Canada or Mexico and that meet other requirements designed to promote a domestic supply chain. The number of eligible vehicles is small, but is expected to increase as automakers like Hyundai make more vehicles in the United States.

The government is also subsidizing the construction of fast-charging stations, which, coupled with investments from automakers like Mercedes-Benz and charging companies like Electrify America, will soon eliminate a major friction point for many car buyers.

Surveys show that many people are interested in electric cars but are concerned about finding a place to charge their vehicle while traveling by car. If governments and businesses implement all the plans they have announced, according to a study released this month by the International Council on Clean Transportation, by 2030 there will be more than enough fast chargers.

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