It will take a miracle for major automakers to be able to meet upcoming zero-emission vehicle (ZEV) mandates in California and 11 other states that have adopted the Advanced Clean Cars II program, according to a memo from Alliance for Automotive Innovation (Auto Innovators) released this week. 

Six of the states — California, Oregon, Washington, New York, Massachusetts, and Vermont — will start requiring automakers to meet mandates in model year 2026 or calendar year 2025, the memo says. Colorado, New Jersey, Delaware, Rhode Island, New Mexico, and Maryland start mandates for model year 2027. 

Auto Innovators refers to the states as the “177 states” in reference to Section 177 of the Clean Air Act that allows states to adopt the identical vehicle standards set by California. 

Starting next year, 35 out of 100 vehicles sold by every automaker in the first six states will need to be ZEVs, the memo says. This will climb to 48 out of 100 vehicles for model year 2027, 51 out of 100 in model year 2028, 68 in 2030, 76 in 2031 and 100 out of 100 in 2035. 

Currently, California, which has invested in EV charging and various incentives for a generation, has an electric vehicle (EV) market share of almost 26%, the memo said. The regulation would require the share be at 35% in model year 2026. 

In comparison, New York, which hasn’t invested in electrification has a market share approaching 10%, the memo says. Yet, it also requires the market share to be at 35% in model year 2026. 

“That’s going to take a miracle,” the memo says. “New York is not ready to meet the ZEV sales requirements of the ACC II program. They’re not alone. Neither are most 177 states.” 

Non-EV-only automakers hold about 13% of the EV market share in California, Auto Innovators said. By model year 2026, these automakers must grow EV sales by 2.7 times in the state and even more in other states. 

Automakers have three options to meet the ratio: 

• • Option 1: Sell more electrified vehicles (increase the numerator).
  • Option 2: Sell fewer total vehicles (decrease the denominator).
  • Option 3: Buy credits from automakers that overcomply the ZEV sales requirements.

Auto Innovators notes that automakers that overcomply would be OEMS that sell only EVs, such as Tesla. 

In 2023, New York sold 76,000 EVs, with 840,000 sold overall, according to the memo. It says that’s currently 9% of the market share. 

EV sales have grown in the state on average at 66% in the past three years, it says. If 2026 EV sales grew by 75% that would add an additional 57,000 vehicles, the memo says. The state would sell about 133,000 EVs and still fall 176,000 EVs short of what would be repaired, according to the memo. 

The 133,000 EVs sold in 2026 would be about 15% of the market share, the memo says. Automakers could choose to reduce the total number of vehicles from 882,000 to 380,000 to meet the mandate. 

“In other words, to comply with the rules, automakers would have to sell half a million fewer vehicles to achieve the required California/177 state ratio in 2026,” the memo says. “And it gets tougher and tougher in each of the coming years as the sales mandates get stricter in every 177 state. By the way, we know what constricting vehicle supply does to vehicle price (see: pandemic).” 

The third option would be to purchase regulatory credits. 

“The credits are costly and divert finite capital automakers need for the expensive EV transition,” the memo says. “The market isn’t particularly transparent and the number of credits available in the coming years will decrease.”

Auto Innovators says that the credits also don’t go toward improving EV charging infrastructure, utility upgrades, or expanding consumer incentives. 

“Payments go directly to Tesla and other automakers ‘over complying’ with the mandates because… they only sell EVs. Tesla’s revenue from regulatory credits in the third quarter was $739 million — the second highest quarter in company history,” the memo says. 

The program will address economic activity, increase costs, and limit vehicle choice, the memo says. 

“It will force consumers to cross state lines and purchase vehicles in states that don’t follow the program,” the memo says. 

States have two options moving forward, it says. 

“Pull their states from the program or double-down and make major EV investments and try to make the regulations achievable,” the memo says. 

Automakers can produce electrified vehicles, the memo said. But customers can still choose what kind of vehicle to drive. 

“The California/177 states are NOT ready for these requirements,” the memo says. “Achieving the mandates will take a miracle. There needs to be balance and some states should exit the program. Automakers are adjusting. 177 state policymakers should too.”

IMAGES

Feauture image courtesy of 3alexd/iStock

Embedded graphs courtesy of Auto Innovators.