California Increases Incentives for Low- to Moderate-Income EV Shoppers

 

By Jonathan Changus

November 17, 2022

Unprecedented demand, supply chain problems and skyrocketing prices are driving up consumer costs in the electric vehicle (EV) market. While more drivers are buying EVs, they are paying more, meaning those with low to moderate incomes face higher financial barriers.

That’s why it is significant that on Nov. 17, 2022, the California Air Resources Board (CARB) approved sweeping changes to increase the incentive amounts of equity programs to help remove financial obstacles to EV ownership. Among the changes approved:

  • Clean Vehicle Rebate Project (CVRP): This is California’s largest, longest-running EV incentive program, which the Center for Sustainable Energy administers statewide. Incentives for new qualified battery EVs (BEVs) and plug-in hybrid EVs (PHEVs) will increase by $3,000 for low-to-moderate income-qualifying applicants, for total incentives of $7,500 (BEVs) and $6,500 (PHEVs).
  • Clean Cars 4 All: This program, currently offered in select air districts, will launch statewide in 2023. The new or used BEV incentive will increase to $10,000, and the PHEV incentive will increase to $9,500. Low-income consumers in disadvantaged communities will receive an additional $2,000 on top of these increased rebate amounts.
  • Financing Assistance: The revamped statewide financing program will return in 2023 and offer price buy-down grants for new or used BEVs and PHEVs for lower-income residents that will increase by $2,500 to $7,500 and $7,000, respectively over the prior program.

Why action was needed

The new EV market in California is booming. The California Energy Commission notes that EVs represent 17.7% of all light-duty vehicles sold in California in the first three quarters of 2022, up from 12.4% for 2021.

But inflation, post-pandemic demand and continuing supply chain issues have increased prices for all new vehicles, including EVs. Kelley Blue Book reports new EV prices in October 2022 were 7% higher than a year ago. The average EV price tag was over $64,000 – more aligned with luxury cars than mainstream car prices. Complicating matters further are lengthy, and frequently unpredictable, delivery delays for the most popular new EV models.

More consumers, especially lower-income families, buy used cars rather than new ones. But surging EV demand is also driving up used EV prices. Expanding the new EV market – especially for more modestly priced models – is a prerequisite to growing the secondary market.

California looked at the data

This summer, the Center for Sustainable Energy (CSE) used its Caret EV Planner Affordability Calculator to analyze the affordability of new and used EVs to determine if the mix of incentives available in California enabled meaningful choices for lower-income consumers. Cost assumptions included purchase price, financing interest, insurance premiums and license and registration fees (among others). 

CARB incorporated this affordability analysis into Appendix C of the Proposed Fiscal Year 2022-23 Funding Plan for Clean Transportation Incentives.

The Caret model found that a four-person household with an income at 400% of the federal poverty level ($111,000 or less) had just one affordable new EV option after state incentives and at least a portion of federal incentives – the 2022 Nissan Leaf S (40 kWh) at $27,400.

The same family of four had many more used EV options, at least on paper. For example, if they participated in one of the Clean Cars 4 All programs by scrapping an older gasoline-powered car for a used EV, there were nearly 80 affordable used EV options, based on the Caret model and fair purchase price data from Kelley Blue Book. However, as noted, the used EV market has experienced rising prices and limited inventory.

Larger state EV incentives can make a difference

CARB’s vote to increase incentive amounts could be a game-changer that advances the state’s commitment to ensuring all Californians have access to EVs.

Some of these incentives can be combined, adding up to a significant rebate. Under the new incentive amounts, low- to moderate-income families could be eligible for $13,500-$15,000 for a new EV and up to $16,000-$19,500 if they scrap an older vehicle.

Some families might also be able to take advantage of the updated $7,500 federal EV tax credit.

In addition, the CVRP Rebate Now option, which provides low-income consumers the CVRP incentive at the point of sale, is proposed to be expanded from the Central Valley and San Diego County to statewide. This expansion of Rebate Now means all low-income consumers could receive the combined incentives at the dealership when they buy an EV versus waiting to receive a check after purchase.

For used EVs, residents who are customers of the state’s two largest electric utilities, Pacific Gas and Electric and Southern California Edison, can combine Clean Cars 4 All or Financing Assistance grants with $4,000 utility rebates. For these customers, the combined used EV incentives range between $11,500 and $16,000.

While it will take time to implement all incentive program changes, these changes are significant and can create a viable pathway for many more lower-income Californians to drive an EV.

Jonathan Changus

Director of California Transportation Programs

Jonathan is the Director of California Transportation Programs. A strategic lead, Jonathan has experience in policy development, program implementation and technology adoption. He supports the implementation of California statewide ZEV rebate and EV infrastructure programs.

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