TODAY’S STUDY: California’s Nation-Leading Clean Cars Plan
The Road Ahead for Zero-Emission Vehicles in California Market Trends & Policy Analysis Adam Fowler, Hoyu Chong, Peter Breslin, January 30, 2018 (Beacon Economics for Next 10)
In March of 2012, Gov. Jerry Brown set a goal of putting 1.5 million zero-emission vehicles (ZEVs) on California’s roads by 2025. Today, California is well on its way toward reaching that goal. There have been bumps in the road, but technology and market trends in California and around the world are accelerating adoption of electric vehicles. And just as cell phones upended the telecommunications industry, electric and autonomous vehicle technologies, combined with new business models, promise to transform the transportation industry.
By October 2017, 337,483 ZEVs had been sold in California, and market growth is accelerating. ZEV sales increased 29.1 percent in California between October 2016 and October 2017, with ZEVs reaching 4.5 percent market share compared to 3.6 percent market share in 2016.
For the most common type of ZEV — the electric vehicle (EV) — the battery is the most expensive component by far, and battery costs are falling fast.1 From 2010 to 2016, battery costs fell from $1,000 to $209 per kilowatt-hour.2 This has allowed car companies to offer greater driving range and better performance at lower price points, while expanding the number and type of EV models they offer. Consumers are responding positively, not just in California but also around the world. Last year, in 2017, global passenger electric vehicle sales reached about 1 million,3 up from half a million in 2015.4
As the world moves toward electrified transportation, China has emerged as a market leader. Chinese manufacturers produced 43 percent of EVs worldwide in 2016, while the U.S. produced 17 percent.5 China is leading on the policy front, as well, joining India, France, the UK and the Netherlands in announcing intentions to ban sales of gasoline-powered cars.
As the rest of the world puts a priority on ZEVs, the U.S. government appears to be moving in the opposite direction, but California remains committed to accelerating the transition to ZEVs. A bill before the California legislature would ban sales of non-ZEV cars by 2040, and Gov. Brown has expressed interest in the idea of phasing out vehicles powered by internal combustion engines (ICEVs). As the sixth-largest economy in the world, California’s actions affect the global automobile market.
This report analyzes California’s ZEV market, including historic sales, costs, technology trends, forecasts and challenges. It also reviews policies and implications that could affect future market growth.
Summary of key findings
California is a leader among U.S. states, but ZEV sales are on the rise across the country.
• California 2017 ZEV sales increased 29.1% over 2016, while US 2017 ZEV sales grew by 28.8% over 2016.6
• ZEV market share in California was 4.5% in 2017, up from 3.6 % in 2016.7 This compares to 2017 ZEV market share of 1.1% in the U.S. and 1.8% in China.8
• When the state’s ZEV goal was enacted in 2012, California needed to average 35.5% annual growth in ZEV sales from 2013 to 2025 to meet its goal.9 But given the 29.1% increase in year-to-date 2017 sales, the annual growth rate required to meet the ZEV goal has decreased to 20% annually.
• Even if California’s sales growth were to slow by 5%, we project the state will easily meet its 1.5 million ZEV goal by 2025, if not before.10
Factors driving acceleration or deceleration of ZEV adoption include: price, performance, choice, convenience, and public policy. Current trends suggest that cost, range, selection and charging-time barriers to EV adoption are likely to continue to lessen, while increased competition will continue to lower costs and improve technology. Figure 1 illustrates that as EV sales rates have continued to increase in the state, range has steadily improved and battery cost has steeply declined, indicating a maturing market for EVs.
Total Cost of Ownership:
While upfront costs for electric vehicles are higher than their ICE equivalents, life cycle fuel and maintenance costs are decidedly lower. An analysis of 17 popular 2017 models found some ZEVs can be price competitive now, without government incentives.
The most expensive component of a ZEV is the battery. From 2010-2016, average battery cost per kilowatt-hour has dropped 74% from over $1,000 to just $273/Kwh (see Figure 2).
For the last 25 years, battery density has improved 5-7% annually, and in recent years, battery range has been improving considerably. In 2017, Tesla Model S had the farthest EPA-rated range for an all-electric vehicle, at 315 miles.
150 different plug-in hybrids and pure electric vehicles are available worldwide, with that number set to rise to over 240 by 2021.13
• In the top California cities for EV penetration, auto dealers offer 25 to 30 different models.14
• More than half of the U.S population lives in a metropolitan area with seven or fewer available models.15
• China leads with over 75 EV models. It introduced 25 new models in 2016 and saw sales jump 70%.16
• Volkswagen, Daimler, Volvo and Nissan have announced plans to electrify their fleets over the next 10 years. GM plans to introduce 20 new ZEV models by 2023, while Ford promises 13.
• Infrastructure: From 2011 to 2016, the number of stations for charging electric vehicles increased by 1,138% in the U.S. However, in 2016 there was only one charging plug for about every six electric cars.17
• As of January 2018, California had a total of 16,549 public and nonresidential privatesector charging outlets, or about six times as many outlets as the next state, Texas. This only works out to 0.05 public charging outlets per ZEV, one of the lowest ratios in the country.18
• Fueling time: Tesla’s Superchargers can recharge EVs to 80% in 20 to 40 minutes. Others fully charge EVs in three to four hours, while slower charging points take around six to eight hours.
• Automakers are working to reduce charging times. For example, Honda is working on high-capacity batteries capable of 15-minute charging with a 240 km range for release in 2022 models.19
• Maintenance: ZEVs require significantly less time and money spent on maintenance because they have only about 20 moving parts -- about 1,980 fewer moving parts than traditional internal-combustion vehicles.
International, national and state policy may play a role in California’s ZEV market.
• National governments including China, the UK, France, the Netherlands and India have stated the intention to phase out the the internal combustion engine.
• CA and other leading states are moving to accelerate ZEV adoption. Eight states including CA signed a memorandum of understanding (MoU) committed to bring 3.5 million ZEVs on the road by 2025.
∙ As of October 2017, California had fulfilled 22.5 % of the MoU goal, followed by Oregon with 10%. California appears to be the only state on track to fulfill its MoU goals.21
∙ In January 2018, Assembly Budget Committee Chairman Phil Ting introduced a bill that would ban gas-powered cars by 2040.22
• There are a number of public policies and funding mechanisms within California to promote the development of charging infrastructure, including settlement funds from Volkswagen’s diesel emissions case.
• The growth of ZEVs represents a significant potential drain on motor vehicle fuel taxes, which could drive a funding gap in state transportation revenue.
• Grid overload is another concern. The California Public Utilities Commission is studying the effects this may have on the grid, while SoCal Edison and the Los Angeles Air Force Base are conducting a pilot program that allows electric vehicles to act as battery storage and send power back to the grid.