Even if the clean air rules announced Wednesday in Washington are less stringent than some environmentalists would like, they will still have a strong effect on the kinds of cars that hit showrooms in the coming years, experts said.
The rules will strengthen 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 expensive sports utility vehicles that have dominated sales so far.
“It probably means more models and lower prices,” said Craig Segall, former deputy executive director of the California Air Resources Board, an agency that played a key role in promoting electric vehicles in that state. “The way you win,” he said, referring to automakers, “is to make sure you have an EV in every segment.”
Despite talk of a slowdown, sales of electric vehicles are growing much faster than sales of fossil fuel vehicles. Electric vehicle prices have fallen significantly and are likely to fall further as automakers improve their manufacturing and the cost of batteries and raw materials plummet.
The Environmental Protection Agency rules announced Wednesday “certainly do not slow down the rate at which our members are scaling up production,” said Albert Gore III, executive director of the Zero Emissions Transportation Association. Members of the association include Tesla and other electric car manufacturers, as well as battery manufacturers, charging companies and suppliers.
The De-Inflation Act, passed by Democrats in 2022, has led to a boom in investment in battery factories and electric vehicle factories. Since then, companies have announced investments of more than $110 billion in battery factories and electric vehicle assembly plants, according to the Environmental Defense Fund. These are long-term financial commitments that companies are likely to stick to regardless of what the federal government does.
Within a few years, electric cars that can travel more than 300 miles on a charge are likely to cost less than gas-powered vehicles, even before fuel savings. Electricity is usually much cheaper than petrol. This will give more car buyers strong financial reasons to go electric.
The average price of a new electric vehicle has dropped significantly. It was $52,314 in February, according to Kelley Blue Book, about $5,000 more than the average for all vehicles. But electric vehicle prices plummeted 13 percent in February compared to a year earlier and more than $2,500 since January alone. The cost of used battery powered vehicles has dropped much more than that.
Prices will continue to plummet as batteries, the most important and expensive component, become much cheaper, analysts say. The average cost of a battery pack is expected to drop more than 40 percent by 2030 compared to 2022, according to estimates by the International Council on Clean Transportation, a research organization.
Electric vehicles are “coming closer to parity with gas cars,” said Katherine García, a transportation expert at the Sierra Club. “We will see this sooner than originally anticipated.”
During the first few years of the EPA rules announced Wednesday, automakers will face somewhat less pressure to cut emissions than under a previous proposal by the agency. The EPA does not dictate to automakers how they meet standards. They can also reduce emissions by improving the efficiency of gasoline engines or by selling more hybrid cars that boost 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 percent of new car sales by 2030, according to EPA estimates, compared with about 2 percent last year.
But automakers will get most of the credit for pure, zero-emissions electric cars. They will account for 44 percent of new cars by 2030, according to the EPA
In the long term, most automakers recognize that they need to sell attractive electric vehicles to survive.
“EVs are clearly the future and what consumers will want and what will be the cheapest to produce,” said Stephanie Searle, program director at the International Clean Transportation Council. “Automakers have to invest in it to keep up.”
Tesla has already shaken up the car market and become the most valuable carmaker in the world. New competitors from China are emerging as Beijing tries 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 way to produce in Mexico or even build factories in the United States.
For automakers, the emergence of Chinese rivals is a powerful incentive. It evokes 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, economical cars. Tesla, Ford and Volkswagen are among the major automakers working on low-cost electric vehicles that are clearly inspired by the threat from China.
Experience has shown that technology often moves faster than regulations require. Under EPA rules that took effect in 2017, electric vehicles were expected to account for 3 percent of new car sales by 2025. But battery-powered cars already make up about 8 percent of the U.S. new car market.
In California, which has long had the strictest pollution limits, electric cars made up 25% of new cars sold last year. And under rules passed in 2022, the state will phase out fossil fuel-burning cars by 2035.
“California has more than its share of EVs because we asked for it,” said Mr. Segall, a former state official who is now vice president of Evergreen, an activist group.
Another 12 states, including New York and New Jersey, model their rules on California’s and won’t be much affected by the EPA regulations because their rules are already stricter. The federal rules will have the biggest impact on states like Texas, Florida and Connecticut that don’t follow California.
The rules will also put pressure on automakers such as Toyota and Stellantis, the 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 aimed at promoting electric vehicles. Tax credits of up to $7,500 are available for vehicles manufactured in the United States, Canada or Mexico that meet other requirements designed to promote a domestic supply chain. The number of eligible vehicles is small, but is expected to grow as automakers like Hyundai build more vehicles in the United States.
The government is also subsidizing the construction of fast-charging stations, which along with investments from automakers like Mercedes-Benz and charging companies like Electrify America will soon remove a major sticking point for many car buyers.
Surveys show that many people are interested in electric cars, but worry about finding a place to charge on road trips. If governments and companies follow through on all the plans they’ve announced, according to a study published this month by the International Council on Clean Transportation, there will be more than enough fast chargers by 2030.
