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Tuesday, Dec 5, 2023

Electric Race

The electric clock’s counting down, as California faces the task of implementing an ambitious goal to ban the sale of gas-powered vehicles by 2035.

The move’s likely to inject new fervor around electrification, and provide another jolt to OC’s increasingly diverse automotive ecosystem, already home to some of the industry’s most prominent EV makers.

The eight largest automakers here—a mix of heritage manufacturers, luxury badges and emerging electric startups—combined to employ 2,465 workers locally as of last month. That’s an increase of nearly 3% from a year ago (see list, page 21).

2035, 2045

Gov. Gavin Newsom’s order late last month could keep the jobs coming for OC’s cluster of EV makers.

The directive rolls back the clock for the state, with the sale of new passenger vehicles and drayage trucks to be emission free by 2035. Medium- and heavy-duty vehicles would be required to be emission free by 2045 “where feasible,” the order reads.

Sales of used gasoline-powered vehicles could continue.

What this means and how it will be implemented now falls on the shoulders of the California Air Resources Board, which is tasked to develop the regulatory framework to move the state to its goals, with a development strategy unifying state and local agencies along with businesses. A game plan is due by Jan. 31 and is expected to be updated every three years.

Rosy Outlook

Orange County’s automotive landscape continues to grow and evolve across its auto manufacturers, battery makers and dealerships, potentially positioning it well for the long haul in the state’s electrification plan.

Karma Automotive LLC CEO Lance Zhou was upbeat on the news, and perhaps with good reason.

The luxury electric automaker raised $100 million in the summer, said it’s launching next year an entry-level luxury offering under the new GS Series and last week said it inked a $300 million joint partnership with Texas-based AYRO Inc. (Nasdaq: AYRO) to make and design electrics for delivery fleets.

“As an Orange County-based electric vehicle company, we support our governor’s decision to ban the sale of gasoline-powered vehicles here in the state,” Zhou said of Newsom’s order.

“We are currently producing our extended range EV, and we recently announced our first all-electric vehicle will debut next year. So, we are perfectly positioned for people looking to purchase an EV both now and in the future.”

There’s also Rivian Automotive LLC, which continues to see its presence here grow. It employed 400 OC workers as of last month, compared to 100 a year ago, as it readies for the release of its electric SUV and truck next year, along with a new, expanded headquarters in Irvine.

Assessing Impact

With guidelines still being developed, some locals appear to be taking a wait-and-see approach to the mandate, reviewing what it entails and how it fits in with their existing electrification plans.

“Mazda will continue its corporate commitment to sustainability, which has long included producing cleaner, more efficient vehicles,” Irvine-based Mazda North American Operations, OC’s largest automaker by OC employees with about 550, said in a statement.

“As part of our global electrification strategy, we will assess the executive order issued in California and will continue to work with key partners and state and federal government for practical, sustainable solutions that meet our customer’s needs and support a cleaner environment.”

Irvine-based Kia Motors America Inc. said last month it plans to release seven new battery-electric vehicles by 2027, with 25% of its global vehicle sales to come from electrics by 2029. The first of the seven rolls out next year and has been codenamed CV.

Hyundai Motor America Inc.’s electric-dedicated brand IONIQ is set to see three models released over the next four years, the company said in August.

Uphill Battle?

A spokesman for Fountain Valley-based Hyundai Motor America deferred comment on the Newsom order to a statement released by the Alliance of Automotive Innovation’s CEO and President John Bozzella, who took a more measured approach on weighing in.

“Our members already offer more than 40 electric car models, and by 2025, that number is expected to more than triple,” Bozzella said in his statement. “But neither mandates nor bans build successful markets. What builds successful markets is widespread stakeholder engagement: a combination of efforts by federal, state and local governments, as well as automakers, dealers, utilities, hydrogen providers, electric infrastructure builders and others.”

EVs currently make up less than 10% of new vehicle sales in California, Bozzella went on to say.

“While that is the best in the nation, much more needs to be done for California to reach its goals,” he said. “It will require increased infrastructure, incentives, fleet requirements, building codes and much more.”

Shaun Skinner, president of Anaheim-based Isuzu Commercial Truck of America Inc., echoed a similar sentiment. Isuzu makes medium-duty trucks, which would have a 2045 target under the order, although what that means is more loosely worded.

“The executive order from Gov. Newsom calls for medium- and heavy-duty trucks to be required to transition to zero emission ‘where feasible’ by 2045,” Skinner pointed out.

He went on to say Isuzu had already started some zero-emission work on its trucks that could be revealed as early as 2024 in California. The more aggressive approach taken by the recent mandate will require work with the state, he said.

“Our trucks will be one piece of a complicated puzzle for our customers as increased infrastructure to support this move—overall and within many facilities—fleet requirements and numerous other factors will come into play and have to be considered as details of the regulations are defined,” Skinner said.

Consumer Buy-In

As with anything, companies can make EVs, but available supply doesn’t force spending. Consumer behavior will have to shift, along with the public and private sectors, some say.

OC’s auto dealers are no doubt part of the equation.

Orange County Automobile Dealers Association Executive Director John Sackrison voiced some concern over the order’s “many unanswered questions.”  

“Consumer demand is a significant concern and while new vehicle dealers want to sell consumers whatever type of vehicle they would like, currently 93% of consumers are choosing not to buy electric in Orange County,” Sackrison said.

“We are fully committed to electric vehicle adoption and host Electric Avenue at the OC Auto Show to help in this effort. Despite California leading the U.S. in Zero Emission Vehicle [ZEV] market share, electric vehicle sales represents a fraction of the 2 million new passenger and light-duty vehicles sold annually.”

Electrics made up 6.9% of vehicles sold in OC last year, Sackrison said, adding while, “that is more than four times the electric vehicle market share in the US, it does not show any indication that 100% by 2035 is achievable.”

He also pointed to affordability, with ZEVs more expensive than gasoline-powered vehicles, even when factoring in government incentives.

The state, for its part, argues the price tag on ZEVs will be cheaper than their gas-guzzling peers by 2035 and maintenance would also be less.

And there’s the question of infrastructure and who pays for it, Sackrison said.

Outside of laying the groundwork for more charging stations, there’s a question of the power grid and whether it can support more EVs.

Time will tell, as work begins on stitching together the regulatory framework and answering industry’s many questions—a task proving to be anything but simple.

“While we support the state’s goals to combat climate change,” Sackrison said, “there are many questions and factors that need to be thoughtfully considered and addressed before implementing such a mandate on consumers.”

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