In summary
Some automakers are reducing production of electric cars and Tesla sales have dropped. Can California sustain its record pace and meet the state mandate?
Has California’s transition to electric cars hit some bumps in the road? Even though Californians are buying them in record numbers, several industry setbacks have been reported in recent months.
The rental car company Hertz is selling about a third of its global electric vehicle fleet, replacing them with gas-powered vehicles. Ford in January announced that it was reducing production of its F-150 Lightning electric pickup truck after scaling it up last year.
Tesla sales in California dropped 10% in the last three months of 2023, when compared to the same quarter a year earlier, according to data from the California New Car Dealers Association. And some automakers last year announced production cutbacks and delays in new electric models.
Today, the California Energy Commission provided another piece of the puzzle: Sales of electric cars in California reached record levels last year, with 446,961 sold, up 29% from 2022, according to Veloz, a nonprofit that works with the commission to promote electric vehicle growth in California.
But while sales of electric cars are still growing, it’s a slower pace of growth than the previous year: 2022 sales increased 38% from 2021.
During the final three months of 2023, Californians purchased 103,127 electric cars, an 8% increase over the same period in 2022. Fourth quarter sales last year were down 14% from the third quarter. But sales typically slow in the fourth quarter, and higher interest rates may have played a role, the commission said.
Nick Nigro, founder of Atlas Public Policy, which researches the electric car market, said the transition to electric cars might be slower than some automakers and experts anticipated.
“Recognize where we are in a once-in-a-century transition — we’re in the very early stages,” Nigro said. “Even though EVs have been around for about 14 years, in this current iteration they only really started to pick up sales nationally in the last five years or so.”
“It’s no surprise that the industry is going to have to adjust their expectations,” he added.
So far, the increased market share for electric vehicles means California is moving toward hitting its goals: Electric vehicles in California made up 25% of the new car market last year, up from nearly 19% in 2022. The state has mandated that 35% of new 2026 cars sold must be zero-emissions, ramping up to 68% in 2030 and 100% in 2035.
“Transportation electrification is rapidly unfolding,” David Hochschild, chair of the California Energy Commission said in a recorded video announcement.
Nationally an estimated 1.2 million electric vehicles were sold in 2023, also a record, according to Kelley Blue Book.
The pace of California’s transition matters because it is far and above America’s leader in sales, and a rapid transition to electric vehicles is key to slashing greenhouse gases responsible for climate change.
When originally introduced, Ford’s electric F-150 Lightning was so popular it had a three-year waiting list. But in January, the company said it was cutting production at its Rouge Electric Vehicle Center in Dearborn, Mich., from two shifts to one, with some workers transferred to factories assembling gas-powered cars. Sales of the electric truck were up 55% in 2023 and Ford projected “further growth for 2024,” but said it was making the changes to better meet customer demand of its pickups.
Automakers “have financial challenges…But every one of them is just delaying. Not one of them is canceling.”
Daniel sperling, UC Davis InstituTe for Transportation Studies
Daniel Sperling, director of the Institute for Transportation Studies at UC Davis, cautioned about reading too much into the slowed-down production of the Ford F-150 Lightning. One interpretation, he said, is that the pickup truck might just simply not be the right product, calling it a “retrofitted vehicle” in which “they just pulled out the drive.”
What’s more, there could be broader financial reasons for the F-150 Lightning slowdown. Sales of all cars slowed last year and legacy automakers faced cash flow challenges and a strike from the United Auto Workers union.
“They’ve got financial challenges, so if they can come up with an excuse to slow down their investments, they’re going to do it,” Sperling said. “But every one of them is just delaying. Not one of them is canceling.”
Earlier this year, Hertz said it was selling its 20,000 electric car fleet. In an interview with The New York Times, Hertz Chief Executive Stephen Scherr blamed price cuts by Tesla for lowering the resale value of the cars, and added that they were more expensive to repair and more likely to be involved in collisions.
Last year, sales by Tesla, by far the leader in electric vehicle sales, sold 230,589 cars, up from 185,090 in 2022, according to the California New Car Dealers Association. But sales dropped in the final three months of the year to 47,592 from 52,782 over the same period the year before. Analysts say that a variety of factors may be at play, such as lower resale value after Tesla’s sticker prices dropped.
One of the biggest problems facing electric car adoption across the U.S. — and the world — is the need for more seamless charging.
A lack of adequate public chargers has become a major impediment as customers begin to weigh electric cars as an alternative to gas-powered vehicles. To that end, the Biden administration is pouring some $623 million into charging projects across the nation, with California getting $168.5 million.
While California is meeting its goals for new electric car and truck sales, the state is projecting that it will need a much more robust electric charging network to support its ban of new gasoline-powered cars by 2035 and serve all drivers statewide.
An Energy Commission report projects that California will need 1.01 million non-private chargers by 2030, and 2.11 million by 2035. It now has only 93,000, according to energy commission data. The state has met at least one important charging infrastructure goal, installing 10,000-plus fast chargers last September.
California’s efforts to support electric car sales could also be stymied by its budget issues. Last year, California eliminated its popular electric car rebate program to focus on providing subsidies only to lower-income car buyers through the Clean Cars 4 All program, which has strict income limits.
This year, Gov. Gavin Newsom has proposed a three-year delay for additional funding for that program, along with other programs aimed at increasing lower-income Californians’ access to cars.
Bill Magavern, policy director of the Clean Air Coalition, said he’s concerned that it could leave low-income communities behind. He thinks the funding delays will likely result in cuts to the program.
“We’re very disappointed in the governor’s proposal because he literally made a promise that he’s not keeping,” Magavern said. “It’s really a fiction to say, well, we’re maintaining this funding, we’re just delaying it by three years.”
Changes in federal tax incentives also may impact sales. The Treasury started the new year off by announcing a relatively short list of cars that qualified for a $7,500 subsidy. The incentives are limited to cars with parts sourced from the U.S. and its allies.
Globally, electric car sales are likely to face a “reality check” this year “given consumer apathy over a lack of fast public chargers and high prices, though China is an exception,” according to a report by Bloomberg Intelligence.
Sales of electric cars in Europe fell for the first time since April of 2020, according to the European Automobile Manufacturers’ Association. And analysts have warned that German carmakers are falling behind Tesla and Chinese models as global competition intensifies.
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