Categories: Finance News

California to ban new gasoline cars by 2035, a first in U.S.

California will phase out sales of new, gasoline-powered cars by 2035 as part of its fight against climate change, Gov. Gavin Newsom announced — the first state to set an expiration date for the traditional automobile.

The move comes as California battles historic wildfires that Newsom has blamed squarely on global warming, with more than 3.6 million acres burned so far this year. It could prompt other states that have followed California’s climate and auto policies in the past to set similar goals.

Newsom cast the step, enshrined in an executive order he signed on the hood of an electric Ford Mustang Mach-E, as an economic opportunity as the state transitions away from fossil fuel production and consumption. He said 34 electric vehicle companies, including Tesla Inc. already operate in California, which accounts for about half of the nation’s EV market.

“The opportunity is limitless for the state of California to compete,” Newsom said in a televised press conference. “This is the next big global industry, and California wants to dominate it.”

Reaction from the auto industry was muted, with only Ford Motor Co. issuing a statement praising the step. General Motors Co. and Fiat Chrysler Automobiles NV deferred comment to their industry trade association, which said more needs to be done to increase consumer demand for electric vehicles. Newsom’s announcement had little impact on stocks of Detroit automakers.

“We agree with Governor Newsom that it’s time to take urgent action to address climate change,” Ford said in the statement. “That’s why we’re proud to stand with California in achieving meaningful green house gas emissions reductions in our vehicles.”

The executive order gives automakers 15 years to make the shift. It doesn’t specify whether the passenger cars sold by that date would be powered by batteries or hydrogen fuel cells — only that they have zero emissions. Sales of used gasoline-powered cars would still be allowed. The order also directs California regulators to ensure that all new medium- and heavy-duty trucks are zero-emission by 2045. The state has already set a goal of eliminating all net emissions from its economy by the same year.

Trump Battle

California, home to 40 million residents and the world’s fifth-largest economy, has for years forced automakers to sell zero-emission vehicles in the state or buy credits from companies that do. The state has also been locked in a legal battle with the federal government over the Trump administration’s efforts to lower future fuel mileage requirements for gas-powered cars.

Six automakers, including Ford, have voluntarily agreed to abide by California’s higher efficiency standards, and Newsom cited them Wednesday as proof that the industry can make the switch.

“They’re not willing to suffer a future of dirtier air, dirtier water and more climate disruption,” he said, adding that 15 countries have already set time-lines for phasing out cars with internal combustion engines. “If you’re an American manufacturer, how can you compete globally unless you’re in that business?”

The transition won’t be easy for the industry, said Jessica Caldwell, executive director of insights for the Edmunds auto information service. Many automakers, she said, have set electrification targets only to let them slide.

“This transition away from gas-powered vehicles is a major shift that won’t miraculously happen on New Years Day in 2035,” she said in an emailed statement. “To help encourage consumer buy-in there will likely need to be financial incentives to get more people willing to go electric.”

The Alliance for Automotive Innovation, which includes Ford, GM and Fiat Chrysler, said a coordinated effort toward electric vehicles is needed among federal and local governments, automakers, dealers and power providers, among others.

“Neither mandates nor bans build successful markets,” the group said. “Electrified vehicles account for less than 10% of new vehicle sales in California. While that is the best in the nation, much more needs to be done to increase consumer demand for Zero Emission Vehicles in order for California to reach its goals.”

Ford is investing $11.5 billion to electrify its lineup, including its top-selling F-150 pickup. Executive Chairman Bill Ford, whom Newsom praised in his remarks, was among the first Detroit executives to acknowledge the role gas-burning cars play in climate change.

GM Chairman Mary Barra has pledged to electrify the automaker’s entire lineup and is reviving the hulking Hummer brand with a 1,000-horsepower electric pickup. GM and Ford have each invested in electric vehicle startups, with GM this month announcing it’s taking an 11% stake in Nikola Corp. and Ford last year invested more than $500 million in Rivian Automotive Inc.

California’s move comes one day after China, the world’s largest auto market, announced plans to become carbon neutral by 2060. Daniel Sperling, a member of the California Air Resources Board, said automakers know zero-emission vehicles are the future, but Newsom’s deadline gives a clearer sense of the path forward.

“It’s really putting a stake in the ground and saying ‘This is what we’re going to do and how we are going to get there,’” said Sperling, who is also the founding director of the Institute of Transportation Studies at the University of California, Davis.

Sperling said the goal was doable but, a lot needs to happen. Falling battery and vehicle prices signal things are going in the right direction, he said.

“The first 50% is going to be fairly easy, relatively,” Sperling said. “The next 50% will be much harder.”