Using the current media’s traffic formula, the US is really panicking this time. Seeing that the most important environmental target may not be achieved, the Biden administration has launched several heavy measures in a row, not only to ensure the completion of the previous plan but also to increase efforts to achieve higher goals.
Electric Vehicle Sales Hit Record High
During his presidential campaign in 2020, Biden made environmental climate a major focus, and after taking office, he implemented many climate-related policies. The most eye-catching among them is his strong support and subsidies for the electric vehicle market, with the goal of achieving a 50% share of new car sales from electric vehicles by 2030.
Electric vehicle sales in the United States are indeed continuing to reach new highs. According to Clean Technica, a US electric vehicle market research firm, pure electric vehicle sales increased by 65% year-on-year last year, reaching 763,000 vehicles. The year-on-year growth rate in the fourth quarter even reached 72%, marking the seventh consecutive quarter of growth, with 235,000 vehicles sold. Compared with the same period two years ago, sales growth has reached a stunning 147%.
Looking at specific brands and models, Tesla remains the undisputed leader in the US electric vehicle market, with sales growing by 43% to 510,000 vehicles last year. After traditional car companies introduced electric vehicle models, Tesla’s market share in the US electric vehicle market has declined from 70% in 2021 to 66%. In the fourth quarter of last year, sales of electric vehicles from non-Tesla brands surged by 269%.
However, Tesla’s advantage in the US electric vehicle market remains unshakable. The Model Y and Model 3 monopolized the top two spots among the best-selling electric vehicles last year (with 84,000 and 54,000 vehicles sold, respectively), while the third-ranked Chevrolet Bolt sold only 16,000 vehicles. Moreover, after Tesla’s continuous price reductions and promotions at the end of last year, its market share in the first quarter of this year is expected to increase significantly.
Now is a low point for the US automotive industry. Due to supply chain issues affecting car production, limited new car supply has driven up prices, the stock market has plummeted, and inflation has severely damaged car-buying intentions, among other factors. As a result, total US car sales last year fell 8% year-on-year to 13.7 million vehicles, hitting the lowest point since 2011. Before the outbreak of the COVID-19 pandemic, US new car sales had exceeded 17 million vehicles for five consecutive years.
Electric car adoption in the US lags far behind Central Europe
However, even with a significant increase in electric car sales in the US, as the overall US car market declines, last year only 5.8% of new car sales in the US were electric cars. In the first quarter of this year, this percentage may have increased to over 7%, and it is expected to reach 8.8% this year, a significant improvement from the previous two years. In 2021, electric cars accounted for only 3.2% of new car sales, compared to 1.7% in 2020.
Obviously, the adoption rate and current status of electric cars in the US are still far from the government’s previous adoption goals, and not only have they not reached the average global growth rate of electric car markets, but they are also far behind China and Europe, the two major new energy vehicle markets. Last year, global pure electric car sales increased by 68% year-on-year, reaching 7.8 million units, and new car sales increased by 10% year-on-year for the first time.
Although Tesla has become a global electric car giant, China and Europe have already far surpassed the US in the popularity of new energy vehicles. In Europe, pure electric car sales increased by 29% year-on-year to 1.58 million units. The market penetration rates of pure electric cars in Germany, the UK, and France were 18%, 17%, and 14%, respectively. In Germany, the largest market in Europe, the proportion of electric car production to new car production will reach 25% in 2022, and more than 30% of new registered cars will be electric cars.
In 2022, China’s production and sales of new energy vehicles reached 7.058 million and 6.887 million units, respectively, with year-on-year growth rates of 96.9% and 93.4%. The market share reached 25.6%, and the production and sales of new energy vehicles have ranked first in the world for 8 consecutive years. Among them, pure electric car sales were 5.365 million units, up 81.6% year-on-year. The proportion of electric cars in China’s new car sales has exceeded 30%.
All these numbers make the current popularity of electric cars in the US pale in comparison, and make the Biden administration, which once claimed to lead the “global climate crisis and new energy transformation”, feel embarrassed. Even if the current electric car adoption rate continues, by 2032, only 45% of new car sales in the US will be electric cars, which will fall short of the Biden administration’s goal of electric car sales accounting for half of all new cars sold by 2030.
Even in California, which has the highest adoption rate of electric cars in the US, the proportion of electric cars in new car sales is still lower than that of China and Europe. Last year, the sales of zero-emission vehicles in California, including electric and hydrogen-powered vehicles, increased by only 38% year-on-year to 346,000 units, accounting for 18.8% of new car sales. Forty percent of zero-emission vehicle sales in the US are in California.
US government plans for two-thirds of new vehicles to be electric by 2032
Pressuring Car Companies to Curve Towards Electric Cars
Against this backdrop, the Biden administration has had to develop additional policies to accelerate the US electric vehicle industry. The US Environmental Protection Agency (EPA) has introduced the “strictest” new regulations on vehicle exhaust emissions to date, requiring all car companies to directly reduce their exhaust emissions by 56% from 2027 to 2032.
In other words, the EPA has not mandated that car manufacturers must sell a certain number of electric cars each year, but has directly limited the total amount of greenhouse gases they can emit, thereby further pressuring traditional car manufacturers to accelerate their electrification transformation. In fact, since the Biden administration came to power in 2021, the emissions reductions from 2023-2026 have already decreased by 25% from the Trump administration period, and now the pressure has been increased.
The EPA predicts that if the new regulations are successfully implemented, electric cars will account for 60% of new car sales in the US in 2030, and more than two-thirds (67%) by 2032; with electric medium-sized trucks accounting for 46%. This means that the new goals of the EPA are one step higher than the Biden administration’s previous goal of half of new cars being electric by 2030.
Transportation is the second-largest source of carbon emissions in the US, emitting 27% of the country’s greenhouse gases in 2020. The EPA also predicts that the new rules will reduce US carbon emissions by an additional 10 billion tons by 2055, which is equivalent to twice the country’s carbon emissions in the past year. At the same time, emissions reductions will also help save the US 200 billion barrels of oil imports and reduce healthcare costs for citizens by up to $1.6 trillion.
EPA Administrator Michael Regan said in a statement that the new exhaust emissions standards will help accelerate America’s transition to a clean vehicle future, address the urgent climate crisis, and improve air quality in the US. This is a historic and important step for children, climate, and the future. The new rules will undergo public review and are expected to be finalized next year.
Reagan believes that the goal of electric vehicle sales reaching 67% by 2032 is “ambitious but achievable.” He mentioned that the federal government offers a $7,500 tax credit for purchasing electric vehicles and invests $50 billion in building 500,000 new charging stations in the infrastructure bill. These measures will collectively increase consumer demand for electric cars.
According to White House statistics, there are currently about 130,000 public charging stations in the US, with about 3 million electric cars in use, and the plan is to have 13 million electric cars by 2030. However, the total number of cars in the US is about 270 million, and the proportion of electric cars is still negligible.
The California government has always been at the forefront of US environmental policies. According to the “Advanced Clean Cars 2” (ACC2) regulation previously introduced by the California government, the proportion of electric vehicle sales in new car sales in California will reach 68% by 2030, 82% by 2032, and the sale of new gasoline-powered cars will be prohibited in 2035.
Obviously, compared with California’s radical policies, the Biden administration’s environmental regulations do not include provisions for banning the sale of gasoline-powered cars. Although the Biden administration has repeatedly expressed support for California’s environmental measures, the federal government is unlikely to set such goals considering the different acceptance levels across the United States.
Traditional Car Companies Complain About Too Much Aggressiveness
This policy will obviously be welcomed by the electric vehicle industry and environmental organizations. Electric car company Rivian issued a statement welcoming the Biden administration’s new exhaust emissions standards, which will be a key complementary measure for US climate change policy. Thomas Pyle, president of the American Energy Alliance, believes that Biden’s actions are actually aimed at banning gasoline-powered cars.
Manish Bapna, president of the Natural Resources Defense Council, an environmental organization, said that the EPA’s new exhaust emissions regulations are the right way to end vehicle exhaust pollution on the road, reduce oil dependence, create more domestic jobs, and reduce fuel costs for consumers.
However, the new emissions regulations will bring more troubles to traditional car companies. The Alliance for Automotive Innovation, an industry association representing traditional automakers, complained directly in a statement that the Biden administration’s EPA’s new environmental policy is “aggressive by any measure.”
The industry association explained that each manufacturer is already vigorously developing electric cars, with plans to invest a total of $1.2 trillion to promote electrification transformation before 2030. Ford and other manufacturers have also set a goal of stopping the sale of traditional gasoline-powered cars by 2040, but the new exhaust emissions standards will only disrupt the established goals of automakers.
Among the traditional car companies currently on the US market, General Motors, Ford, and Stellantis (formerly Fiat Chrysler and PSA Group), Toyota, and Honda all have electric vehicle sales targets between 40% and 50% for 2030, with only a few manufacturers such as Daimler and Volvo having higher targets than the Biden administration’s previous plan.
This means that these car companies were already struggling to meet the Biden administration’s 2030 goals, and now they are forced to accept even higher requirements. General Motors and Ford did not publicly oppose the EPA’s new regulations, but hinted that they need more policy support from the government.
On the one hand, traditional car companies are complaining, but on the other hand, radical environmental organizations believe that this is far from enough. After the new exhaust emissions standards were introduced, the Center for Biological Diversity believes that the Biden administration should require a direct reduction of carbon dioxide emissions by at least 75% by 2030, forcing automakers to increase electric vehicle sales and reduce the sale of millions of gasoline-powered cars, especially large and polluting SUV models.
Policy Risks and Public Observations
However, next year’s US election results have also brought many policy uncertainties to the new US electric vehicle policy. Regardless of whether Trump or DeSantis comes to power, the Biden administration’s efforts in environmental regulations over the past few years may be in vain. Current Republican polls show that Trump’s support is much higher than DeSantis, and if the current situation continues, he is likely to be nominated as a presidential candidate again.
It is well known that Trump and the Republican Party have close ties to the traditional energy industry in the United States. After Trump came to power in 2016, he directly led the United States to withdraw from the Paris Climate Agreement, appointed ExxonMobil Chairman and CEO Rex Tillerson as US Secretary of State, and even appointed Andrew Wheeler, who denies climate change and served as a lawyer for coal companies, as EPA Administrator.
In addition, more than 10 conservative states, including Texas, are suing the federal EPA. If conservative federal judges issue injunctions, the Biden administration’s electric vehicle new regulations can only be forced to be suspended. If the conservative faction dominates the Supreme Court, this new regulation may even be directly revoked.
On the other hand, the high price of electric cars is also hindering the popularization of electric vehicles in the United States, which cannot be solved by the new EPA regulations. According to industry statistics from KKB, the average price of electric cars in the United States before subsidies is as high as $58,600. Even with the $7,500 federal tax credit, electric cars are still expensive.
The automotive information agency LMC Automotive believes that due to the significantly higher price of electric cars compared to gasoline-powered cars, even by 2032, the proportion of electric cars in new car sales in the US can only reach 49% and cannot reach a higher level, making it impossible to completely replace gasoline-powered cars in the future.
