Electric vehicles Solution or Diversion? China Given A Path To Worldwide EV Domination - Updated China's Recipe For World Automotive Domination Library
Commentary By Andrew Tolve TU Automotive 29th August 2022
California will follow Europe’s lead by banning the sale of fossil fuel-powered cars, pickup trucks and SUVs by 2035, setting the stage for a wave of like-minded regulations across America.
Though the deadline is 13 years away, California’s new rule will impact carmakers immediately because it puts into place stepwise requirements on the road to zero-emission vehicle sales. By 2026 35% of all new vehicle sales must be powered by hydrogen or batteries. By 2030, that number jumps to 68% of all new vehicle sales. To meet those targets, carmakers will have to ramp up production quickly. Last year just 12% of all vehicle sales were zero-emission vehicles. This year is tracking at 16%.
The California Air Resources Board passed the new rule unanimously last week after Governor Newsom had proposed it in 2020. The rule will have no effect on ICE powered vehicles that are already on the road, now or moving forward. Still, it is expected to halve the pollution from cars, pickups and SUVs by 2040.
More importantly, it probably will inspire other states to adopt similar rules since California often serves as the bellwether of change in America for the auto industry and beyond. In 1971 chef Alice Waters opened a restaurant called Chez Panisse in Berkeley, California, with a novel focus on local farmers and their freshly grown produce. Her farm-to-table approach set off a culinary revolution that now is standard fare at restaurants throughout America. In 1995 California became the first state to ban smoking in restaurants, workplaces and bars. Now, 82% of the US population lives with a protection against smoking in bars, restaurants or workplaces.
The list goes on: California was first to legalize medical marijuana in 1996 and gay marriage in 2005. It’s the cradle of the internet and the tech boom. It’s the home of Hollywood and cinema. As California goes, so goes the rest of America and the world.
The trend holds with the auto industry. California is the birthplace of tailpipe emission standards and the catalytic converter. Almost a third of states have already adopted California’s previous emissions standards. Expect the same to happen this time around, most likely with New York, New Jersey and Pennsylvania quickly following suit.
Whether automakers in America are ready to meet a wave of state-led sales mandates is another story. I’ve documented recently how despite the growing popularity of electric vehicles, automakers keep moving toward the luxury EV segment, introducing models that are tens of thousands of dollars, if not hundreds of thousands of dollars, more expensive than the average consumer can afford. That’s fine for the 1% but, for the other 35%, or 68%, or 99%, that’s simply unattainable. There’s going to need to be an imminent shift toward entry-level vehicles, fueled by an improved supply chain and North American production of batteries, if zero-emission mandates are going to work.
Last week Volkswagen signed a memorandum of understanding with the Canadian government to pursue battery production opportunities in the near future. Paul Myles has the details. Canada’s minister of innovation, science, and industry paid a visit to Tesla and Elon Musk last week as well, amid rumors that Tesla’s next gigafactory could land in Canada. An announcement is due by the end of the year.
Look for more announcements to follow, in Canada and the US, from every carmaker in the North American market as they race to keep up with their competition or find a competitive advantage. The new $430Bn Climate Bill that President Biden signed into law two weeks ago will further stimulate this activity, since EVs now only qualify for federal tax credits if they are mainly sourced and manufactured in North America.
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