Editors’ note: This article was updated Sept. 15 to reflect legislative action.
California car buyers are getting a mixed bag of news this week, some of which could have profound implications for the future of the state’s effort to get 1.5 million drivers out of emission-spewing vehicles and into electric alternatives.
The Legislature sent the governor a bill—outlining how to spend $1.5 billion in proceeds from the state’s cap-and-trade auctions—that includes $140 million to replenish the state air board’s rebate fund for zero-emission vehicles, a popular and often over-subscribed program to assist consumers in buying pricey electric cars.
A last-minute provision took a broadside at Tesla, and possibly other car manufacturers, by requiring that the air board and the state labor department develop a system to certify that companies included in the rebate program are “fair and responsible” in the treatment of their workers.
The requirement, which would take effect next year, appears to have been inserted at the behest of labor interests, who have been attempting to unionize Tesla’s manufacturing plant in Fremont. Some employees have complained of low wages and unsafe working conditions, a charge Tesla disputes.
Angie Wei of the California Labor Federation reminded the Senate budget committee Wednesday that the automotive industry created the American middle class. She also defended the provision, insisting “those companies who believe they are treating their workers fairly and responsibly, I believe they have nothing to worry about.”
Should Tesla fail to qualify for the rebates, the impact could be serious, as its all-electric cars have the highest price tags on the market and consumers might balk if the cars are out of reach. A lessening of demand would surely reduce production of the clean cars, apparently setting back the state’s ability to reach it goals. “This provision creates an unpredictable standard that would be impossible to adhere to while creating uncertainty in an already challenging market,” the Association of Global Automakers warned in a letter to the governor.
Gov. Jerry Brown is expected to sign the bill, which matches his proposed amount to keep the rebate program going.
The rebates—about $2,500 for buyers of small electric cars—are seen as a critical incentive to help meet the state’s goal of putting 1.5 million electric cars on the roads by 2025. It has a long way to go: There are 323,000 clean vehicles in California now.
While sales are creeping up, ownership of full electric and plug-in electric cars still appears behind schedule. Some skeptics have suggested that to come close to achieving its goals, the state will need to more aggressively goose sales of all-electric cars and trucks. But the Legislature earlier this year balked at a bill by Democratic Assemblyman Phil Ting of San Francisco that would have directed $3 billion over 12 years to fund and streamline the rebate program. Critics complained it failed to identify where the money would come from.
But there’s been unforeseen good news. The outlook for electric cars would have been much more bleak if not for the misdeeds of automaker Volkswagen, which was caught in 2014 having installed devices to circumvent California’s pollution tests. In total, VW admitted fitting 11 million of its cars with test-defeating software in a scandal known as ‘dieselgate.’
The company paid out more than a billion dollars to the state to settle its myriad legal issues. Part of the deal was a controversial arrangement for VW to fund installation of a broad network of charging stations, many in low-income neighborhoods. To be operated by a VW subsidiary, Electrify America, those stations will collect fees from drivers in exchange for charging services.
That deal dropped an $800 million windfall into the air board’s clean vehicle program.
Viewed through a pragmatic lens, the company’s get-out-of-jail money hasn’t bailed out the state program, but it certainly comes in handy.
“The money came at the right time,” said Dean Florez, a member of the air board.
But even with the addition of the VW charging infrastructure, the company’s total contribution will only amount to about 10 percent of the stations that California will eventually need, according to the air board. There are currently about 11,000 public charging stations in the state.
In addition to funding the charging stations, VW was required to pay $25 million to general support of the ZEV program, including vehicle replacement for low-income consumers.
California’s leading-edge vision for an electric highway was born out of its climate policies that sought to reduce greenhouse gas emissions. The program started strong in its inception in 2010, and the state’s consumers buy more than half of the nation’s stock of battery electric, plug-in hybrid and hydrogen vehicles. Automakers now manufacture more than two dozen low-emission vehicle models sold in California.
But tastes have changed. Consumers seem to prefer trucks and SUVs, and lower gasoline prices have meant they don’t pay a penalty at the pump. As a market share, hybrid electric and fully electric cars represent less than 5 percent of new cars sold in the state.
Conversations about adoption of electric cars generally include two issues: the availability of rebates to purchase the cars and charging stations to run them.
California’s rebate of $2,500 for a smaller car is far less that the federal rebate of $7,500—together they bring a vehicle that can cost $35,000 more into range for some consumers. The program is once again oversubscribed, with a waiting list for most consumers to receive a rebate. The air board says that everyone who has previously applied for a rebate will get one. Rebates for low-income applicants, who have first priority, are available now, the agency said.
To address consumer range anxiety—concern about being stranded when a car’s juice runs out—manufacturers are rolling out more cars with longer ranges. The new Chevy Bolt, for example, can travel 238 miles on a single charge.
Bill Magavern, policy director for Coalition for Clean Air, which has sponsored numerous bills encouraging adoption of low-emission vehicles, hopes the Legislature continues to support the program, and extends rebates to upgrade heavy-duty trucks and buses to low-emission technologies.
“Consumers will continue to warm to these vehicles,” he said. “Clearly we have a long ways to go. I don’t think anybody thinks we’re on track” to reach the state’s goals.
For his part, Ting isn’t giving up on his legislation. “Unfortunately, we ran out of time this year to reach an agreement but our need to act remains clear,” he said in a statement. “California must have more clean cars on the road to meaningfully reduce the emissions that dirty our air and contribute to climate change. Our state must play an active role in facilitating the shift to zero-emission vehicles through a more aggressive rebate program. “