The California EV Mandate is Expensive, Impractical, and Likely to Fail (Part 1)

Last week, the California Air Resources Board (CARB), an unelected regulatory body, announced a plan to try to force the state’s car fleet to change over to electric vehicles. The plan seeks to ban the sale of new purely hydrocarbon-fueled cars in California by the year 2035. The plan will be very expensive, is completely impractical, and is certain to fail, as even CARB seems to acknowledge by reserving the right to amend the targets if the market fails to respond to their diktat. The only question is how much cost and disruption will happen before CARB is forced to accept reality.

This is part one of a three-part series focusing on the CARB 2035 plan.

Part 1: Expensive:

California’s EV mandate will be expensive, likely for many individuals and certainly for the state economy as a whole. EVs are not cheap to purchase, are only affordable to operate if you assume electricity prices stay low, and need expensive infrastructure upgrades to support general use. Mandating more EVs than the market would organically support is a guaranteed recipe for unnecessary costs. 

Electric vehicles (EVs), at all price points, are more expensive than comparable internal combustion (ICE) vehicles. This is primarily due to the cost of the large, heavy battery packs required to give EVs something resembling the range people need from their cars. On average, EVs retail for about $18,000 more than the average ICE vehicle. That big upfront difference is why EVs are still mostly a luxury item, a second or third car for the wealthy. And that price differential is not coming down, in the last year, multiple car companies have announced increases in the prices of their EV offerings. The California government asserts that this price differential will come down as batteries get cheaper to manufacture, but there is little evidence that battery prices will fall indefinitely. Indeed, a primary reason for the announced price increases is the increasing cost of battery inputs. The supply and price of mineral inputs like lithium, nickel, or cobalt are not controlled by regulatory diktat or wishful thinking. 

The state further argues that EVs cost less to own over the life of the vehicles largely thanks to not needing to pay for gas. But there are many reasons to doubt the accuracy of that calculation. It is highly dependent on how a person uses their vehicle, for one. It also assumes that electricity prices remain low relative to gasoline, even as California has the highest electricity prices in the country and is implementing policy actions that will only increase rates. The calculation also takes no account of the cost of time: even “fast” chargers take far longer to fuel an EV than it takes to fill up a gas tank. And faster chargers are more expensive to build and maintain so likely to remain relatively rare; if forced to charge at slower chargers, the time cost to EV owners is increased. And don’t forget that the lifetime of battery packs is less than the lifetime of the car, which means that a used EV will need an expensive battery replacement, a replacement that may cost more than the value of the entire car.

Another cost that regulators like to ignore is the cost of infrastructure needed to support EVs. Chargers are expensive to build and must be maintained. There are also billions in additional transmission and electrical grid infrastructure that must be built to even allow for more chargers to be built. These costs are often hidden for an individual EV owner by subsidies or spread across electricity ratepayers, but in the economy-wide tally, those costs still exist. And these costs are not being imposed to meet an organic need, liquid fuel infrastructure is widespread, efficient, and serves everyone in the state. Duplicating this entire transportation infrastructure is a political need, not an economic one. 

Another cost of this program is actually borne by non-Californians. As has been seen under California’s existing zero-emission vehicle program, in order to get Californians to buy electric vehicles so they can comply, carmakers have to sell EVs at cost or even a loss or buy credits from a company like Tesla. The carmakers don’t just eat this loss, they increase the prices of vehicles in other parts of the country to balance out their California compliance losses. These imposed costs on other states is one grounds for the inevitable legal challenges to this new rule that will shortly arise.

In short, there are a huge number of known costs that make widespread EV adoption an expensive proposition, both at the individual level and at the economywide level. Now subsidies may hide some of the costs to individuals, but the costs are borne by people somewhere. The claimed savings are notional and modeled for future savings. Meaning that they are not necessarily going to happen: if the model assumptions are wrong, then the “savings” evaporate. Massive upfront costs in the hazy hope of future savings is a hell of a way to try to run an economy, but then we are talking about bureaucrats and politicians, not people who have to run a business in the real world.