Summary

The US remains an important market for automakers, accounting for 20% of vehicles and about 15% of EV sales globally. However, regulatory gridlocks in the country are hampering EV from reaching their full potential. A closer analysis of the US EV market reveals that sales are mainly driven by Tesla and by pro-EV policies introduced in California. Growth in EV sales though has failed to meet industry expectations with uncertainty prevailing in regulations and policies at the national level, leading to slow development of the EV ecosystem.

 Exhibit 1: EV Sales in the US, (in ‘000 Units), Share of California in Total Sales (in %)

NOTE: Only BEV and PHEV included

Uncertain Regulatory Environment

In 2017, at the recommendation of a few automakers, the Trump administration approved easing fleetwide Corporate Average Fuel Economy (CAFÉ) standards to 37 miles per gallon (mpg) by 2025, from 54.4 mpg mandated by the earlier administration (in 2013). The Trump administration also directed all states to comply with these new, more lenient, standards and revoked California’s autonomy to implement stricter polices, e.g. the Zero Emission Vehicles (ZEV) Program. In 2019 California, along with 22 other states, filed a suit against the revocation to reinstate the previously established standards.

In January 2020, the administration rejected GM’s and Tesla’s plea seeking extension of the $7,500 tax credit qualification to cover three times the initial 200,000 EVs threshold per automaker. The government did not increase the threshold, on the contrary, the government slightly reduced the tax credit to $7,000.

Lack of EV Charging Infrastructure

Inadequate charging infrastructure has hampered the growth of EVs in the country. Out of the total 68,800 public charging stations in the country, California (with 22,620 charging stations) along with other ZEV states account for the vast majority. Unlike China, where the central government plays a pivotal role in setting EV charging infrastructure, state governments provide incentives, rebates in the US with central government playing a minor role.

While stringent emission norms in these states have encouraged the growth of EV charging infrastructure so far, the lower than projected EV demand being realised (due to regulatory uncertainty regarding emission policy) will adversely impact their sustainability and growth.

Conclusion

Central governments’ role in providing subsides, setting stringent emission norms and mandates like ZEV programs have played pivotal roles in promoting EVs in countries like China and Norway. Protracted legal battles between states and central government will continue to adversely impact EV sales in the US, at least for the next couple of years. Counterpoint expects slower growth of EVs in the US compared to key markets like Europe and China. The legal wrangles are leading automakers to consider limiting their EVs objectives and launches only to ZEV states and focusing on other countries with supportive EV regulations. For example, GM plans to launch all its 20 upcoming EVs during the 2019-2023 period in China.

Consensus between the central and state governments and stringent national emission standards, in line with prospective EV regions like Europe and China, would encourage automakers to set aggressive EV sales plan for the country, and promote standardisation and development of products for domestic and export markets. A national level ZEV policy along with financial subsidies, and non-financial benefits like free parking, use of bus lanes etc will further benefit the sales of EVs in the country.

Exhibit 2: EV Sales in US (‘000 Units)

NOTE: Only BEV and PHEV included