EDITOR'S NOTE: California is looking to ban all gas-powered vehicles by 2035. Such a massive level of adoption being a tall or seemingly impossible order, the California Air Resources Board voted today to make official the legislation. Let’s set the clean versus fossil fuel energy debate aside for now. What does this agenda entail for metals like silver, lithium, and other “green” metallic components? Part of what’s making this agenda seemingly impossible is the short supply of raw materials to make battery components, lithium being one. Although silver may not be in as dire short supply as lithium, its demand comes in two forms: monetary and industrial. It’s a hybrid metal, so to speak. And with silver prices down nearly 33% from their 2020 highs, it’s just a matter of time before investors and manufacturers alike are scooping up the metal, especially at such bargain prices. And if other states follow California’s green lead, then you, as a metals investor, will know hosw to capitalize on the trend.
California is poised to ban the sale of gas-powered vehicles starting in 2035 in a massive push toward EV adoption being heralded as a major win in the fight against climate change.
Why it matters: The plan would effectively start the clock on what would be a huge challenge for an industry already facing production shortfalls, stressed supply chains and unforeseen cost challenges for electric vehicles.
Driving the news: The California Air Resources Board will vote Thursday on a rule requiring all new vehicles to be fossil-fuel-free by 2035. The widely expected move comes after Gov. Gavin Newsom issued an executive order in 2020 calling for such a goal.
- "It's ambitious, it's pioneering, it's what we must do if we're going to leave this planet better for future generations," Lauren Sanchez, senior climate adviser to Newsom, said Wednesday on a conference call.
State of play: Automakers are investing heavily in electric vehicles, with several — including General Motors, Mercedes-Benz and Volvo — having already committed to transitioning fully to EVs by 2035 or earlier.
- EVs made up 15% of California new-vehicle sales in the first half of 2022, according to the California New Car Dealer’s Association.
Yes, but: Meeting the 2035 goal will put immense pressure on automakers to accelerate production of vehicles that they currently can’t build enough of.
- Shortages of battery components, including crucial raw materials, have hampered output, leading to long wait times.
- John Bozzella, CEO of the Alliance for Automotive Innovation, which represents the major automakers on policy issues, said the targets will be "extremely challenging" to hit.
Details: 35% of automakers' new sales in California will need to be zero-emission vehicles in 2026. The targets — which allow for some plug-in hybrids — steadily increase each year, hitting 68% in 2030 and 100% in 2035.
What they're saying: “I don’t know if it’s realistic,” Autotrader analyst Michelle Krebs tells Axios. “Everybody’s working toward that goal, but there are some hurdles — and some we had not anticipated.”
- "Whether or not these requirements are realistic or achievable is directly linked to external factors like inflation, charging and fuel infrastructure, supply chains, labor, critical mineral availability and pricing, and the ongoing semiconductor shortage," Bozzella said in a statement. "These are complex, intertwined and global issues well beyond the control of either CARB or the auto industry."
Worth noting: Prices of EVs were supposed to be declining by now due to increased economies of scale. Instead, they’ve been increasing.
- The average transaction price of an EV in July was $62,893, up 14.8% from $54,797 a year earlier, according to Edmunds. That compares with an average of $47,198 for all vehicles in July.
- “Affordability is the biggest issue,” Krebs says. “I don’t know if there will be enough vehicles at an affordable price by 2035.”
Nathan’s thought bubble: There are realistic goals — and then there are stretch goals. This one feels more like the latter — unless supply chain problems clear up quickly, or California backs up its mandate with significant incentives on top of a federal EV tax credit, for which very few vehicles currently qualify.
- But California has a long-established track record of pressing the auto industry to achieve higher fuel efficiency targets than the federal government requires.
- And those requirements have prompted automakers to boost fuel economy in the past, sometimes even as they grumble about it because they can’t afford to miss out on the lucrative Californian market.
What others are saying: "If automakers can pick up production, sufficient investments are made in charging infrastructure and the power grid, and financial incentives can be made more available, this milestone should be achievable — if not surpassable," wrote Edmunds analyst Jessica Caldwell.
What we’re watching: Whether automakers can obtain sufficient supplies to meet demand.
- “We always reserve the right to amend the regulation at any point,” Jennifer Gress, CARB’s sustainable transportation chief, said on the conference call. “We will certainly be monitoring this one closely is — how is the market doing.”
(Disclosure: Autotrader is owned by Cox Enterprises, an Axios investor that recently reached a deal to acquire the company.)
Originally published on Axios.