California is set to overhaul its approach to electric vehicle (EV) incentives, shifting focus from broad rebates to targeted assistance for lower-income residents. This significant change marks the end of the popular Clean Vehicle Rebate Project (CVRP) and the expansion of the Clean Cars 4 All program, aiming to make electric cars accessible to more Californians.
Established in 2010, the Clean Vehicle Rebate Project has been a cornerstone of California’s strategy to encourage EV adoption. However, the program has faced challenges with funding shortages and lengthy waiting lists, indicating a need for reform. As electric vehicles transition from niche to mainstream, California is recalibrating its incentives to address income disparities in EV ownership. The state aims to ensure that the benefits of clean transportation are shared across all economic levels, not just higher-income households.
The California Air Resources Board (CARB) announced that the Clean Vehicle Rebate Project will conclude once its current funding is depleted this year. In its place, the state will amplify the Clean Cars 4 All program, transforming it into a statewide initiative in the coming year. This revamped program will exclusively offer subsidies to residents with low-to-middle incomes, recognizing that these individuals face greater financial hurdles in purchasing electric vehicles.
The new income restrictions are considerably stricter than those of the outgoing CVRP. Under the revised guidelines, Californians earning more than 300% of the federal poverty level will no longer be eligible for state EV subsidies. Currently, this income threshold is $43,740 for individuals and $90,000 for a family of four, with adjustments based on household size. This is a significant shift from the previous CVRP, which allowed individuals earning up to $135,000 and joint filers earning up to $200,000 to qualify for rebates. Rebate amounts under the old program ranged from $7,500 for lower-income applicants to $2,000 for those with higher incomes within the allowed limits.
David Clegern, spokesperson for the California Air Resources Board, emphasized the equitable intent behind this policy change. “The goal here is not to eliminate options for one group of motorists at the expense of another, but to assist those who’ve been unable to purchase a cleaner vehicle,” Clegern stated. He further explained that the objective is to “broaden and deepen the state’s ZEV (zero-emission vehicle) fleet,” making zero-emission vehicles affordable for a wider segment of the population.
Experts acknowledge the pivotal role the Clean Vehicle Rebate Project has played in driving EV adoption in California. However, with EVs gaining traction in the market, the state is strategically pivoting to address affordability barriers. This transition reflects a mature phase in EV market development, where the focus shifts from initial adoption incentives to ensuring equitable access.
The expanded Clean Cars 4 All program will offer substantial incentives to eligible Californians. Those who scrap and replace older, gasoline-powered vehicles can receive up to $12,000 towards a cleaner vehicle. For those not retiring an older car, purchase grants of up to $7,500 will be available. This program was previously limited to the five largest air districts in California but will now be accessible statewide, increasing its reach and impact.
Furthermore, California car buyers can also benefit from the federal electric vehicle tax credit, which can provide up to $7,500 for certain EV models. The federal tax credit also includes income limitations, set at $150,000 for individuals and $300,000 for married couples filing jointly, aligning with the state’s focus on income-based incentives.
Bill Magavern, policy director of the Coalition for Clean Air, based in Los Angeles, views this policy shift as a move to “democratize clean transportation.” Magavern argues that the original broad-based rebate was crucial in the early stages of EV adoption when these vehicles were perceived as “exotic and strange and out of reach for most people.” However, he believes that “now EVs have gone mainstream,” making it appropriate to redirect subsidies towards those who need them most.
Despite the rationale for income-targeted incentives, some concerns have been raised by car dealerships. Jessie Dosanjh, president of the California Automotive Retailing Group, representing dealerships in the San Francisco Bay Area, expresses apprehension that ending rebates for middle-to-higher income Californians might deter potential EV buyers. Dosanjh points out that electric cars remain relatively expensive compared to conventional vehicles. In the Bay Area, electric vehicles constitute approximately 20% of sales, highlighting the region’s relatively high adoption rate but also indicating room for further growth.
However, Dosanjh acknowledges the logic behind the state’s strategic pivot. “As we’re moving into more mass adoption, I think it’s critical to have that income-based structure, because it opens up the market to some people who might be on the fringe, and not be able to afford it due to income limitations,” he stated. This perspective recognizes that sustained EV market growth requires addressing affordability for a wider range of consumers.
Recent data indicates a downward trend in EV prices. In July, the average price of an electric car was approximately $53,469, roughly 18% lower than the previous year. While this price decrease is encouraging, the average price for all new cars in July was around $48,300, still placing EVs at a premium.
The Clean Vehicle Rebate Project’s impact is undeniable. It has issued half a million rebates totaling $1.2 billion. The program’s popularity persists, with a record 14,000 applications received in July alone, according to CARB. The program’s website currently indicates that funds are nearly depleted, and applications received after September 6, 2023, will be placed on a standby list with no guarantee of a rebate.
Steve Douglas, vice president at the Alliance for Automotive Innovation, an auto industry group, acknowledges the program’s success but recognizes the policy direction. “While it is disappointing to see the most successful incentive program in history end, the march toward eliminating traditional (rebates) and directing the very limited funding to equity programs has been clear for several years now,” Douglas commented.
California’s overarching goal is to electrify its vast fleet of 25 million cars, combat air pollution, and reduce reliance on fossil fuels. The state’s ambitious mandates require that zero-emission vehicles constitute 35% of new car models sold in California by 2026, escalating to 68% by 2030 and 100% by 2035. Achieving these targets necessitates ensuring EV affordability across all income brackets throughout the state.
However, a CalMatters analysis of California ZIP codes revealed significant disparities in EV ownership. High concentrations of EVs are predominantly found in affluent communities with predominantly white and Asian populations. Conversely, ZIP codes with larger Latino and Black populations exhibit extremely low EV adoption rates, with many areas showing virtually no electric car ownership. The analysis suggests that income is a primary factor driving these disparities, with median household incomes in top EV adoption ZIP codes significantly exceeding the statewide median.
Dosanjh from the Bay Area dealership group noted that early EV adopters were often affluent individuals, particularly those in the technology sector. However, he observes a shift towards more mainstream adoption, with increasing numbers of people purchasing EVs as replacements for their gasoline vehicles rather than as luxury or novelty items.
California has already surpassed 1.6 million zero-emission vehicle sales, with EVs accounting for one in four cars sold in the second quarter of this year. Erich Muehlegger, an economics professor at UC Davis, affirms that the Clean Vehicle Rebate Project has been “the main workhorse to encourage people to buy zero-emissions vehicles.”
Despite its success, the CVRP has faced funding inconsistencies and shortages. The program experienced surges in demand, leading to funding gaps and extended waiting times for rebates. Furthermore, the landscape of state EV incentive programs has been perceived as complex and confusing for consumers. The transition aims to streamline access to incentives, directing resources more effectively.
According to Clegern, CARB’s spokesperson, the decision to phase out the CVRP has been in planning for several years. The initial benchmark for this transition was set at 16% EV market share in new vehicle sales, but the program was extended until EVs reached 25% of new sales to ensure market stability. Clegern stated, “The state concluded that shifting financing to Californians who may have been left out of the ZEV market because of their income is the right thing to do and also deepens the market.”
The expanded Clean Cars 4 All program is designed to address these equity concerns, targeting low-to-middle-income households and those residing in disadvantaged communities characterized by socioeconomic challenges and environmental vulnerabilities. The revamped program will also incorporate enhanced financing assistance for eligible buyers, further facilitating EV adoption for those most in need. Funding for these programs is sourced from the state’s Greenhouse Gas Reduction Fund, generated through the sale of carbon allowances to emission-producing businesses, as well as allocations from the state budget, ensuring a dedicated financial mechanism to support California’s electric vehicle program and its commitment to clean transportation for all residents.
