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California wants to drive a stake through the heart of gas-powered vehicles.
State regulators on Thursday approved a policy that prohibit the sale of new gas cars by 2035 in what is the country’s largest car market.
It’s part of an ambitious plan to fight climate change by accelerating the transition to an electric future, and it’s a move a handful of states should follow.
Despite strong demand for electric cars, sales only accounted for 3% of total car sales last year.
The race is now on for automakers to increase production of electric vehicles, but that alone will not be enough.
Analysts say the industry faces several challenges to end gasoline car sales by 2035.
Electric vehicles are still very expensive
The average price of an electric vehicle is currently $66,000, well beyond the means of many people.
“It’s not going to fit into a lot of people’s monthly budgets at this point,” says Jessica Caldwell, executive director of Insights at Edmunds. “They [automakers] must first introduce the most expensive, expensive and profitable vehicles to earn money to start finance some of the cheapest vehicles.”
Automakers like Chevrolet and General Motors aim to offer more affordable options in the coming years. A key provision of President Biden’s Cut Inflation Act also calls for an overhaul $7,500 tax credit when buying a new electric car, although it does come with a number of caveats.
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But to make cars more affordable, electric vehicles will have to make batteries more cost-effective.
“Batteries are simply more expensive than the internal combustion engine,” says Carla Bailo, president and CEO of the Center for Automotive Research. “Most manufacturers are saying that by 2025 batteries will be on par with the cost of an internal combustion engine and when that happens it will definitely help bring the price down.”
However, making batteries cheaper presents another challenge.
China dominates critical minerals market
China currently dominates the market for rare earth minerals and the auto industry has long relied on the country to source batteries for electric vehicles.
The Biden administration is pushing automakers to reduce their reliance on China, but that’s easier said than done.
“Something in the range of about 90% of the lithium used in batteries is currently processed in China, which is not a desirable situation,” says Guidehouse Insights analyst Sam Abuelsamid.
And finding new sources or partners will not be easy.
“Getting minerals from places we have trade agreements with is going to be the biggest challenge because there is huge competition for that,” says Michelle Krebs, executive analyst at Cox Automotive. “Everyone is scrambling to make deals for minerals.”
But even if companies are able to increase production, they might encounter another problem.
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EV infrastructure is still quite limited
Not only are there too few charging stations across the country, but many existing stations do not always work.
A recent survey by JD Power found that the limited availability and reliability of charging stations is a key factor preventing people from buying electric vehicles.
The federal government spends $7.5 billion to expand the country’s charging infrastructure.
But even if it does, it’s unclear how much an already fragile and vulnerable power grid can endure.
Then there is another obstacle.
Auto Industry Workforce Adjustment
Embracing an electric future and accelerating the mass adoption of electric vehicles will require automakers to adapt their workforces.
Companies will need engineers with a different skill set for this transition.
“They’re not going to be designing new transmissions, but rather they need people with the skills to design electric motors and electric architectures,” Abuelsamid says.
Analysts expect to see companies lay off some workers while hiring in electric vehicle-focused departments in the coming years.
From ramping up production to reorganizing the workforce, the transition is unlikely to be a smooth process for buyers, drivers and – in particular – the auto industry, but the transitions are. rarely.
“They are bumpy and I think there will be some unpredictable things,” Krebs said. “So hang in there.”