By Rob Nikolewski | The San Diego Union-Tribune
Sales of electric vehicles in California hit an all-time high at the start of last summer. But registrations declined in the third quarter of 2023 and slipped again in the final three months of the year.
Is it a statistical fluke, or does it indicate a trend?
It’s a question with plenty of ramifications for the state’s clean transportation goals — especially since Gov. Gavin Newsom in 2020 issued an executive order mandating the elimination of all new sales of gasoline-powered passenger vehicles in the Golden State by 2035.
Also see: Rivian to cut 10% of salaried staff as EV momentum stalls
Newsom and officials in his administration say the focus on the recent drop in sales numbers is overblown in light of California’s rapid adoption of zero-emission vehicles, with the pace especially accelerating in the last four years.
“I actually take issue with the contention that there is somehow bad news here,” said David Hochschild, chair of the California Energy Commission. “The overall trend is very positive and it’s a big deal that one out of every four vehicles sold have a plug. So I think the larger story is that EVs (electric vehicles) are enjoying an unprecedented growth spurt.”
But some automotive analysts are not so sanguine, pointing to larger issues facing the transition to EVs and whether the industry ran too far ahead of what mainstream consumers really want when they pay the increasingly high price tag attached to new cars and trucks.
“Automakers said, ‘Let’s go all-in on EVs, that’s the real technology,’ but the problem is that consumers are not there yet,” said Ivan Drury, senior manager of auto insights at Edmunds.com. “Honestly, it’s a national problem.”
The numbers
California has set the national standard on EV sales. Four straight quarters of growth culminated with a record 122,387 registrations between April and June 2023, according to data of light-duty vehicles compiled by the California Energy Commission.
But in the third quarter, EV sales slipped slightly to 119,587 and the fourth-quarter numbers dropped to 103,127 — a decline of 15.7 percent compared to the all-time high in the second quarter.
Quarterly numbers posted by the California New Car Dealers Association showed similar declines.
The Newsom administration and officials at the energy commission say the numbers simply reflect the fact that overall car and truck sales — regardless of power train — dropped in the second half of 2023.
According to the car dealers association, registrations for all vehicles in the third quarter (451,889) were lower than in the second quarter (475,480) and the fourth-quarter numbers (426,150) were lower than the third quarter.
And despite EV sales declining in the third quarter, their share of the California market hit an all-time high of 22.3%.
“Do I worry about one quarter? No,” said Newsom when asked about EV sales at a news conference Tuesday in Sacramento while announcing the renewal of a climate partnership between California and Sweden. “That’s frankly a talking point. A talking point coming out of the fossil fuel lobby. … You saw automobile (sales) numbers drop generally in Q4. Unsurprisingly in the EV space, one quarter does not make a market — quite the contrary.”
The week before, the Governor’s Office touted on X, formerly Twitter, how EV sales in the Golden State are up more than 1,000 percent in the past decade.
Hybrids keep humming
While overall registrations declined in the second half of 2023, the sale of hybrid vehicles did not.
Hybrids without an electric plug-in experienced 3% growth in the third quarter and rose 7.6% in the fourth quarter of 2023, according to numbers posted by the California New Car Dealers Association.
When operating at low speeds, traditional hybrids without a plug rely on the car’s electric motor and then shift to the internal combustion engine when additional power is needed. By contrast, a plug-in hybrid runs on electricity for about 20 to 40 miles and then calls on its gasoline-powered engine to extend the vehicle’s range.
Going back to the introduction of the Toyota Prius in North America in 2000, “California consumers have seen the benefit of a hybrid vehicle,” said Brian Maas, president of the California New Car Dealers Association.
“Especially for those who aren’t yet ready or can’t quite afford to switch to a full EV, a hybrid vehicle makes a lot of sense — better gas mileage, getting the benefits of electrification but you can still use gasoline on those long trips.”
Even though EV adoption rates have soared, one major hurdle continues to be “range anxiety” — the fear that the vehicle’s electric charge will drain, leaving the driver searching for a nearby charging station before the car conks out.
Also, EVs are typically more expensive than gasoline-powered vehicles. According to Kelley Blue Book, the average new car buyer in the U.S. paid $48,247 in November. The average for a new EV came to $52,345.
“I think consumers feel that the hybrid is one of those things where you kind of get the best of both worlds,” said Drury of Edmunds.com, which reported that national sales of hybrids near the end of 2023 were up 76 percent.
The Wall Street Journal last month reported that dealers who sell General Motors cars and trucks, worried about customers who aren’t ready to switch to fully electric vehicles, are pressing company executives to introduce more hybrid models into the market.
Rental car giant Hertz recently announced that it is selling one-third of its EV fleet and reinvesting in gasoline-powered vehicles, citing weak demand and repair costs.
Last month, Ford said it is cutting production of its F-150 Lightning electric pickup due to weaker-than-expected sales. The truck had a deluge of customer reservations when it first rolled out but its sticker price starts at $51,990.
“The problem is that people were reserving multiple vehicles across multiple brands and whoever gave it to them first, they then canceled their reservations with the other brands,” Drury said. “So that sense of demand was actually much more over-inflated than anyone could have anticipated.”
California benchmarks are coming soon
Questions about sales rates have implications for California because the mandate banning the sale of new gasoline-powered vehicles by 2035 has benchmarks that begin in two years.
Under standards passed by the California Air Resources Board, at least 35 percent of model year 2026 passenger cars and trucks sold in the state will be electric vehicles, plug-in hybrids or hydrogen fuel cell vehicles. The numbers ramp up each year, going to 68 percent in 2030 and 100 percent by 2035.
Hybrids without a plug-in do not count.
Energy commission chair Hochschild said he “absolutely” has no doubts the targets can be reached in the long- and short-term.
“When Gavin Newsom began as governor, we were 8% of new vehicle sales being electric to last year being at an all-time record of 25% … So going another 10% or so in the next two years is absolutely within reach,” Hochschild said.
To help ease range anxiety, the energy commission is deploying about $4 billion in charging infrastructure projects across the state. Investor-owned utilities such as San Diego Gas Electric are also building charging stations, as are EV charging companies such as Electrify America, EVgo and ChargePoint.
To add customer convenience, major automakers are adopting the North American Charging Standard (NACS), commonly known as the Tesla plug, in which different brands of EVs can get charged using the same connection system. Stellantis, the parent company of Chrysler, Jeep, Ram and Dodge, earlier this month announced it will adopt the Tesla plug on its models starting in 2025.
By the way, the Tesla Model 3 and Model Y have been the two top-selling vehicles in California for seven consecutive quarters, according to California New Car Dealer Association numbers.
Hochschild accentuated positive developments in the zero-emission vehicles space, such as lower costs for the minerals that go into lithium-ion batteries and improvements in technology so that EVs can extend their mileage between charges.
“We’re seeing some real breakthroughs, both in energy density and in lithium costs, where we went from $80,000 a ton to $20,000 a ton in a year,” Hochschild said. “So these macro trends, I think, are more significant than fluctuations between quarters.”
The road ahead
But some auto analysts look at the EV numbers and while they acknowledge the year-over-year numbers are impressive, the slowdown in sales gives them pause.
“Policymakers need to realize that this is really happening,” Drury said, “and if (the lower numbers) last more than a few months or a few quarters, there’s something there and they really need to find out what they can do to combat it.”
Maas of the car dealers association said, “Nobody is giving up on electrification of the vehicle fleet, but it’s undeniable in our report and many other anecdotal reports that EVs are not selling as quickly as they were before.”
EarthJustice, an environmental group based in San Francisco, has been a longtime supporter of the EV transition as part of a larger effort to end the use of fossil fuels.
“Manufacturers intent on weakening California’s zero-emissions regulations are keen to sell us all a story about Californians not embracing clean vehicles in the big picture, but that couldn’t be (further) from the truth,” the group’s deputy managing attorney, Adrian Martinez, said in an email.
The purchases of zero-emission vehicles in the state are “actually ahead of schedule,” Martinez said, and “if anything, Gov. Newsom and the California Air Resources Board should look at the growing enthusiasm from Californians and consider speeding up life-saving regulations to protect our lungs and clear our skies of smog.”
The Pacific Research Institute, a libertarian think tank based in Pasadena that espouses free-market solutions to policy matters, has been a critic of the 2035 requirements.
“When you have these edicts, these mandates, it’s betting everything on one hand,” said senior fellow Wayne Winegarden, “and if that hand’s not a winner, then you have huge consequences.”
But even Winegarden is holding fire to see if the numbers represent a pattern or just a blip.
“It’s always important to to wait and see if a trend is developing before we say too much,” he said. “Certainly, next quarter’s numbers I think are going to be watched very carefully.”
Data points for the first quarter of 2024 are expected to come out in May.
This story originally appeared in San Diego Union-Tribune.
