Electric vehicle sales are up sharply in California, mostly due to Tesla

Russ Mitchell, Los Angeles Times on

Published in Business News

Partly because of their high costs, electric cars so far have proved unprofitable. Carmakers are selling them at a loss. Government subsidies on electric car purchases have proved necessary to keep consumers interested.

Carmakers hope that production levels will reach the point where per-car costs fall, subsidies are no longer necessary and EVs can be sold at a profit. When that point will be reached, no one can say.

Tesla succeeded in becoming the world's first mass-market EV manufacturer with the Model 3, with a base price of $39,000. But the 16-year-old company has yet to make an annual profit, and it's selling cars at only a bit over half the 500,000 annual rate it had told Wall Street to expect by now. The company's overall sales curve is flattening.

The Trump administration is battling with California over auto emissions and fuel economy regulations. If the White House is successful, EV sales growth could take a drubbing. California has been allowed to require tougher emissions standards than the federal government's, and other states have been allowed to follow California's lead. Under the Obama administration, California and federal motor vehicle clean air rules were made the same. The Trump administration wants to roll back emissions and fuel requirements and force California and the other states to conform with the weaker federal rules.

Four automakers -- Ford, Honda, Volkswagen and BMW -- have agreed to a compromise with California to keep most of the existing requirements in place. Other companies, including General Motors, have not taken a stand on the compromise. The U.S. Department of Justice has opened an investigation into whether the four automakers broke the law with the agreement.

All carmakers have said they need consistent regulations to meet global regulatory goals toward cleaner vehicles. But those goals are out of sync, for now, with the market. A recent report from independent Europe auto analyst Matthias Schmidt said that, to meet ambitious European Union air requirements, plug-in sales would have to more than double next year.


"One potential issue could be that manufacturers are forced" to incur losses to meet the targets, and individual European governments are likely to have to support manufacturers with increased purchase incentives or other "fiscal tools" to prop up sales and reduce automaker losses.

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