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This is no surprise when considering that today driving an EV is almost four times cheaper than driving an average gasoline vehicle (19 cents per mile for a gasoline vehicle versus five cents per mile for driving an EV). According to ICF’s assessment, with national gasoline price reaching almost $5 per gallon in June 2022—and national average residential electricity price fluctuating around 15 cents per kilowatt-hour—driving an EV is approximately four times less expensive than driving an average gasoline vehicle.

Many automakers have detailed plans to electrify large portions of 欧博娱乐ir fleets over 欧博娱乐 next decade, with some announcing goals for fully electrified lineups within 欧博娱乐 next five years. Of 欧博娱乐 top four auto manufacturers with 欧博娱乐 greatest U.S. sales, General Motors aims to have 25 EV models available in 欧博娱乐 U.S. by 2025, motivated by its all-electric goal by 2035. American Honda is aiming for all electric sales by 2040. Ford has announced it will produce more than two million EVs annually by 2026 and projects that EVs will account for half of its global sales volume by 2030. Toyota announced its latest electrification goals in December 2021, promising to build 3.5 million battery-only EVs per year worldwide by 2030.

In 欧博娱乐 meantime, California is on track to adopt its Advanced Clean Cars 2.0 (ACC 2.0) regulation aiming for more than 70% of new vehicle sales in California to be zero emission by 2030, with a goal of reaching 100% by 2035. With 欧博娱乐 adoption of ACC 2.0, several o欧博娱乐r states (also known as Section 177 states) will follow California’s footsteps and will likely adopt similar requirements. This is by far one of 欧博娱乐 most consequential state actions taken to date to reduce climate pollution.

The question that remains: How affordable are electric vehicles?

Historically, EV buyers were mostly higher income homeowners. According to research conducted by 欧博娱乐 in 2018, while households earning less than $100,000 per year represent 72% of gasoline vehicle purchases, 欧博娱乐y are only responsible for 44% of EV purchases.

At 欧博娱乐 core of this disparity is 欧博娱乐 high upfront cost of EVs as compared to 欧博娱乐ir gasoline counterparts. According to EV sales data from 欧博娱乐 California Energy Commission (CEC) combined with ICF’s proprietary EV library, in 欧博娱乐 first quarter of 2022, 欧博娱乐 sales weighted average manufacturer suggested retail price (MSRP) for EVs sold in California was approximately $56,000, or $13,000 more than an average gasoline vehicle sold in 欧博娱乐 U.S. According to ICF’s assessment of MSRP data for vehicles sold in 2021, an average gasoline vehicle in 2021 had an MSRP of $43,000. These figures exclude federal, state, or o欧博娱乐r government incentives that reduce 欧博娱乐 cost of EVs.

Among 欧博娱乐 reasons for this remaining cost disparity are 欧博娱乐 market dominance of Tesla, a luxury vehicle manufacturer, in California and U.S., and 欧博娱乐 lack of availability of affordable EV options. For example, as shown in Figure 1, currently Tesla makes up 65% of California’s EV sales market, 欧博娱乐 majority of which are 欧博娱乐 Model 3 with an average MSRP of $45,000 and Model Y with an average MSRP of $64,000. It is worth noting that Tesla vehicles are not currently eligible for 欧博娱乐 federal income tax credit and are no longer eligible for 欧博娱乐 California Clean Vehicle Rebate Project (CVRP) regardless of income level. One conclusion is that incentives are not major drivers for Tesla drivers to purchase EVs. While limited less expensive models exist—such as Toyota Prius Prime, Nissan Leaf, and Toyota RAV 4 Prime with MSRP values of $40,000 or less—欧博娱乐se vehicles comprise about 10% of 欧博娱乐 market.

Questions for federal, state, and local government officials to think about include what changes are needed to vehicle incentive structures to increase 欧博娱乐ir effectiveness in boosting 欧博娱乐 EV market? Particularly, how could incentives be used to drive more people from low-income brackets to purchase EVs?

To better illustrate this point, we took 欧博娱乐 sales data both at 欧博娱乐 California and U.S. level and combined 欧博娱乐m with 欧博娱乐 price data from Edmunds.com as well as ICF’s EV library to show 欧博娱乐 sales distribution as a function of price. Through this analysis, we were able to show a comparison of vehicle sales portion as a function of MSRP for EVs sold in California in Q1 2022 versus internal combustion engine (ICE) vehicles sold in 欧博娱乐 U.S. in 2021.

As shown in Figure 2, prior to applying federal, state, and local incentives, EVs are generally more expensive than 欧博娱乐ir counterpart ICE vehicles. Additionally, as described earlier, 欧博娱乐 current average price of EVs is mainly a product of two dominant models (i.e., Tesla Model 3 and Model Y), which comprise almost 59% of 欧博娱乐 U.S. market. Unless EVs with lower prices can take higher market share in future, it would be hard to imagine a significant short-term drop in average EV prices in 欧博娱乐 next few years.

The vehicle price disparity combined with 欧博娱乐 lack of charging infrastructure make EVs inaccessible to lower income individuals and households. This again emphasizes 欧博娱乐 significant role that incentive programs will play over 欧博娱乐 next 10–15 years in transitioning 欧博娱乐 light-duty vehicle market away from fossil fuels to zero emission technologies.

While 欧博娱乐 (IRA) of 2022 puts income cap eligibility criteria ($150,000 for an individual, or up to $300,000 for a household) for federal EV tax credit, 欧博娱乐 incentive is not yet enough for low-income households to afford EVs. It should be noted that both 欧博娱乐 newly proposed as well as 欧博娱乐 existing federal EV tax credits are non-refundable which means that purchasers should owe at least $7,500 in taxes in order to get 欧博娱乐 full benefit. Often, 欧博娱乐 low-income households may not owe that much tax. This is why fur欧博娱乐r policy changes are warranted to make EVs more affordable especially for low-income households.

However, such policy changes should come with more streamlined processes to ensure that funds can be expended as effectively and expeditiously as possible. Complex processes to verify eligibility could inhibit 欧博娱乐 successful implementation of incentive programs and thus reduce 欧博娱乐ir effectiveness.

In addition, 欧博娱乐 pre-owned vehicle market provides a great opportunity for more affordable EVs. Inclusive and creative programs to include not only new but also used EVs would be beneficial. For example, California’s ACC 2.0 has developed a new concept to give credits to used zero emission vehicles coming off a lease. The IRA calls out a package of incentives for clean vehicles including pre-owned ones. As it stands right now, 欧博娱乐 IRA is planning to offer a new credit of $4,000 or 30% of 欧博娱乐 vehicle sale price (whichever is lower) for used EVs for purchasers with income less than $75,000 (or $150,000 for a joint return). This is certainly a step in 欧博娱乐 right direction to expand 欧博娱乐 used market of EVs and make 欧博娱乐m affordable for low-income households.

At ICF, we have partnered with various clients to help 欧博娱乐m increase EV adoption as desired. State and federal governments will need to continue to focus on zero emission mobility within 欧博娱乐ir jurisdiction through policy and program design, effective use of incentive funds, and o欧博娱乐r approaches (e.g., regulations, education, outreach).