California’s electric vehicle ambitions are facing a reality check.
Sales growth has stalled as potential buyers balk at high sticker prices and unreliable public charging. The EV market will take an additional hit if President-elect Donald Trump follows through on vows to scuttle federal EV tax credit subsidies for buyers and slap tariffs on automobiles made in Mexico, driving prices higher.
The headwinds are fueling fresh doubts about Gov. Gavin Newsom’s mandate that all new cars sold in California by 2035 be zero-emission vehicles. The first big test for the governor’s edict comes next year, when 35% of new vehicles sold must be zero-emission, up from 26.4% now. To hit that mark, EV sales would have to skyrocket 33%.
“I have not seen a forecast by anyone that that number is achievable,” Toyota North America Chief Operating Officer Jack Hollis said on a conference call with reporters last month. “Demand is not there.”
Jessica Caldwell, an analyst with Edmunds, was only slightly less skeptical. “It’s definitely a challenge,” she said.
It’s so much of a challenge, state officials have changed the way they talk about it.
“We never expected a perfectly shaped curve over time. The 35% is an ideal number,” said Dave Clegern, a spokesperson for the California Air Resources Board, which set regulations to enforce Newsom’s mandate.
(California Air Resources Board)
That’s a fundamental change in vocabulary. Previous documents issued by CARB used the word “requirement.” The 100% by 2035 figure is in fact a mandate, but the percentage goals between now and then are a bit more complicated.
The first issue is how car sales are counted. The state uses “model year” sales to meet its requirements, not calendar year sales. For example, the 35% requirement covers the 2026 model year, but counts a carmaker’s 2026 models sold in 2025 and 2026. In the past, most new models were introduced in and around September, but carmakers now introduce new models throughout a calendar year.
The other issue is the multiyear formula the state uses to set automaker requirements in any given year. The 35% ZEV sales threshold isn’t a percentage of a carmaker’s total sales for that model year, but instead is the annual average of a carmaker’s total sales two, three and four years ago. For example, a vehicle manufacturer’s ZEV sales for model year 2026 must be at least 35% of the average of total sales for all kinds of vehicles from 2022 to 2024.
Automakers have the option to use only the current model year instead, but averaging the current year with lower numbers makes the 35% easier to reach.
While the state’s math may allow California to meet the 2026 target, attainment of the 100% zero emission target by 2035 is clouded by the slowdown in consumer sales and potential new tariffs that could keep more affordable import options out of the U.S. market, including low-cost EVs from China.
Newsom’s mandate affects more than California. Eleven other states have followed suit, allowed to do so by the federal Clean Air Act. That means two sets of greenhouse gas reduction standards in the U.S. — a technology-neutral federal standard that sets limits on emissions however cars are powered, and the 12-state California standard that mandates sales of zero-emission vehicles.
The auto industry lobby group, the Alliance for Automotive Innovation, issued a media release Wednesday that states outside of California are even further behind in public charging infrastructure and that “achieving the mandate will take a miracle.”
Meanwhile, the Sacramento-based EV advocacy group Veloz said via email that it takes a long view. “Getting to 100% EVs is kind of like graduating from high school where you must survive middle school first. We will get there with the right EV education and investments.”
Newsom said last month that California is prepared to offer state tax rebates for EV purchases if the Trump administration ends the federal program, which provides EV buyers a tax credit of up to $7,500. The rebates, which could come from the state’s Greenhouse Gas Reduction Fund, would require legislative approval.
Newsom also hinted that Tesla might not qualify. His press release on that matter said the move “would include changes to promote innovation and competition in the ZEV market,” which some have interpreted as a signal that Tesla might not qualify.
Tesla Chief Executive Elon Musk describes himself as “first buddy” to Trump, a Newsom adversary. Nonetheless, Tesla remains by far the No. 1 seller of EVs in California.
Asked how the state planned to boost EV sales by 33% in model year 2026, the governor’s office replied with a statement focused on gains to date.
“With more than 2 million electric, plug-in hybrid and fuel cell vehicles sold in California and more than a quarter of new car sales being zero-emission, our state has made historic progress,” the statement said, pointing to “a nearly 300% increase in the share of clean car sales. The Governor fully expects this progress to continue.”
After years of strong gains, EV sales growth is flattening out. For the first three quarters of 2024, ZEV sales in California totaled 338,853 vehicles. That represents growth of less than 1% over the same period last year.
EV sales growth across the United States is nearly flat too, up just 1.3% in September.
Automakers, most of whom lose money on each EV they sell, must boost EV growth across the U.S. for any chance at profits. Automakers have invested or are planning to invest hundreds of billions of dollars globally to build a thriving EV market, according to industry consultant AlixPartners, but so far most are losing money.
Right now consumers aren’t going along, and automakers are pulling back and hedging their bets.
“We believe EVs are indeed the future of transportation, but have been skeptical and vocal on the pace of adoption,” financial firm Pickering Energy Partners said in a recent note to investors. Tesla deliveries are below expectations, Volvo has moved back its 2030 100% EV timeline, General Motors abandoned its 1-million-vehicle 2025 sales goal, and Ford has shifted some EV production back to internal combustion vehicles, the note reported.
Meanwhile, EV startups are struggling. California-based Fisker declared bankruptcy, while luxury EV makers Rivian and Lucid, whose vehicles draw rave reviews from the automotive media, have seen shares drop precipitously this year as the companies fall short of sales goals.
Automakers are shifting their production mix to hybrid vehicles, which rely mostly on fossil fuel engines but are equipped with small batteries to increase fuel efficiency.
At a time when high prices and high interest rates are a drag on sales of all automobiles, whatever powers them, failure to meet the California mandate will impose extra costs. Automakers that don’t measure up to California’s EV market requirements are obligated to buy clean air credits, usually from a competitor that holds a surplus. Tesla would be a primary beneficiary.
Trump, who calls himself the “tariff man,” could further dampen expectations that lower-priced imports will help boost EV sales to those who currently can’t afford them. He’s proposed 25% tariffs on goods imported from Mexico and Canada.
Believing they were protected from tariffs by the United States-Mexico-Canada Agreement, the Trump-backed successor to the North American Free Trade Agreement, companies including General Motors and Ford set up EV factories there. BMW is planning to open an EV factory in Mexico in 2027. Any tariffs would obviate much if not all of the cost savings achieved by manufacturing there, presenting another challenge for Newsom and his EV ambitions.