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Even though the clean air rules announced Wednesday in Washington are less forceful than some environmentalists expected, they should still have a powerful impact on cars appearing in showrooms over the next several years, experts said.
The rules will help market forces move the industry toward battery power, giving automakers a stronger incentive to sell a wider, more affordable variety of electric cars — not just the expensive sport utility vehicles that have been on sale until now. Are dominating.
“It probably means more models and lower prices,” said Craig Segal, former deputy executive officer of the California Air Resources Board, an agency that has played a key role in promoting electric vehicles in that state. “The way you win is by making sure you have an EV in every segment,” he said, referring to carmakers.
Despite talk of a recession, sales of electric vehicles are growing much faster than sales of vehicles running on fossil fuels. Prices of electric vehicles have fallen significantly and are likely to fall further as carmakers become better at making them and the costs of batteries and raw materials come down.
Albert Gore III, executive director of the Zero Emissions Transportation Association, said the Environmental Protection Agency rules announced Wednesday “certainly do not slow the pace at which our members are increasing production.” The association's members include Tesla and other electric car makers, as well as battery manufacturers, charging companies and suppliers.
The Inflation Reduction Act passed by Democrats in 2022 helped boost investment in battery factories and electric vehicle plants. 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 can follow no matter what the federal government does.
Within a few years, electric cars that can go more than 300 miles on a single charge are expected to already cost less than gasoline vehicles when accounting for fuel savings. Electricity is usually much cheaper than gasoline. This will give more car buyers strong economic reasons to adopt electric cars.
The average price of a new electric vehicle has dropped significantly. According to Kelley Blue Book, it was $52,314 in February, which is still about $5,000 more than the average for all vehicles. But electric vehicle prices in February fell 13 percent from a year earlier, and fell more than $2,500 from January. The price of used battery-powered vehicles has fallen by more than that.
Analysts say prices will continue to fall sharply as batteries, the most critical and expensive component, are becoming much cheaper. The average cost of a battery pack is on track to fall by 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 catching up with gas cars,” said Kathryn Garcia, a transportation specialist with the Sierra Club. “We're going to see it even earlier than originally forecast.”
During the early years of the EPA rules announced Wednesday, automakers will face somewhat less pressure to cut emissions than under the earlier agency proposal. The EPA does not direct vehicle manufacturers how to meet the standards. They could also reduce emissions by improving the efficiency of gasoline engines or by selling more hybrid cars that augment a gasoline engine with a battery and electric motor.
Plug-in hybrids, which can travel short distances on battery power alone and are growing in popularity, may become widespread during the next few years. According to EPA estimates, they will account for 9 percent of new car sales by 2030, compared to about 2 percent last year.
But automakers will get the most credit for all-electric cars that produce no tailpipe emissions. According to the EPA, 44 percent of their cars will be new by 2030
In the long term, most automakers accept that they need to sell attractive electric vehicles to survive.
“EVs are clearly the future and what consumers will want and what will be cheapest to produce,” said Stephanie Searle, chief program officer at the International Council on Clean Transportation. “Automakers need to invest in it to maintain it.”
Tesla has already shaken up the car market and become the world's most valuable automaker. New competitors are emerging from China, as Beijing tries to take advantage of technological change to become a major auto exporter.
Tariffs and other restrictions have limited Chinese exports to the United States until now. But automakers like BYD, which sells electric cars for less than $12,000 in China, could also find a way by producing in Mexico or building factories in the United States.
For automakers, the emergence of Chinese rivals is a powerful motivator. It brings back unpleasant memories of the way Toyota, Honda and other Japanese automakers broke up the dominance of Ford Motor, General Motors and Chrysler in the 1970s with affordable, fuel-efficient cars. Tesla, Ford and Volkswagen are among the major automakers working on low-cost electric vehicles apparently motivated by the China threat.
Experience has shown that technology often advances 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 account for about 8 percent of the U.S. new car market.
In California, which has long had strict pollution limits, 25 percent of new cars sold last year were electric cars. 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. Segal, 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 after California's and will not be much affected by EPA rules because their rules are already strict. The federal rules will have the greatest impact on states like Texas, Florida and Connecticut that do not follow California.
The rules will also put pressure on carmakers like Toyota and Stellantis, owner of Chrysler, Dodge, RAM and Jeep, which have been slow to sell fully electric vehicles.
The EPA rules are one of several Biden administration policies aimed at promoting electric vehicles. Tax credits of up to $7,500 are available for vehicles that are manufactured in the United States, Canada or Mexico and meet other requirements designed to boost domestic supply chains. The number of vehicles that qualify is small, but is expected to grow as carmakers like Hyundai make more vehicles in the United States.
The government is also subsidizing the construction of fast-charging stations, which, along with investment from carmakers like Mercedes-Benz and charging companies like Electrify America, will soon remove a major hurdle for many car buyers.
Surveys show that many people are interested in electric cars but are worried about finding a place to charge on road trips. If governments and companies follow through on all their announced plans, there will be more than enough fast chargers by 2030, according to a study published this month by the International Council on Clean Transportation.
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