With help from Noah Baustin, Camille von Kaenel, Heather Richards and Lesley Clark
FOOT OFF THE GAS: California officials are still riding high on the back of record-breaking electric vehicle sales — but the post-EV-incentive hangover is about to set in.
The Trump administration’s shredding of former President Joe Biden’s EV playbook — most notably the $7,500 federal tax credit for drivers — catalyzed a wave of purchases ahead of the Oct. 1 expiration date, resulting in a quarter where nearly 30 percent of all cars sold in California were battery-electric and plug-in hybrid.
Gov. Gavin Newsom is taking the rare win in a brutal year for EV policy, including Republicans’ rollback of the state’s EV sales mandate and plateauing EV market share.
“We’re setting new records because this state believes in innovation, not isolation,” Newsom said earlier this month after the state released sales data for July through September.
That victory lap is likely to be short-lived, though.
A J.D. Power market analysis released Thursday projected that EVs will represent just 5 percent of new car sales nationally in October, a nearly 60 percent plunge from September and a 40 percent drop compared to the same month last year.
And while California has by far the largest and most mature EV market in the nation, auto industry experts say the state isn’t immune to larger market shifts.
“Sales will decline in the short run for sure,” said Gil Tal, director of the University of California, Davis’ EV Research Center. “That’s pretty clear — we saw a lot of sales in September and we’ll see fewer the rest of the year.”
Meanwhile, the two major U.S. automakers — Ford and General Motors — said in earnings reports and calls last week that they’re planning to build more gas-powered pickup trucks and SUVs to make up for projected losses in their EV businesses.
“I think it’s going to be a vibrant industry, but it’s going to be smaller, way smaller than we thought,” Ford CEO Jim Farley said at an event a day before the federal EV tax incentive expired.
Car dealers say they’re already seeing the impact on the ground. Jessie Dosanjh, president of the California Automotive Retailing Group, said he’s seen a dramatic decrease in traffic online and at his 17 showrooms during October, and that he’s expecting a lower supply of EV models in the coming years. His dealerships represent 11 brands, including Chevrolet, Ford and Hyundai, which have all made major investments in EVs and battery manufacturing.
“They have to be profitable at the end of the day,” Dosanjh said of the automakers. “So I do see reduced EV production, and the ones that are produced are probably going to be cheaper.”
Market analysts say that despite the headwinds, the long-term trajectory of the American auto industry is still trending towards EVs. Jessica Caldwell, head of insights at automotive research firm Edmunds, said that while companies are rethinking how aggressively they’ll push the technology, they’re still rolling out new models and competing over pricing.
Hyundai announced plans earlier this month to slash the price of its popular Ionic 5 by $9,800, while Ford, GM and Tesla are all dropping prices or rolling out cheaper models.
“Automakers are committed to electric vehicles, so it’s not as if they’re going away,” Caldwell said. “I think all this means is that the timeline to get to a majority mix of electrified vehicles is just going to be a bit slower.”
California’s tools to speed up that timeline are limited in the face of Trump’s assaults on state policy and a looming budget deficit that has already forced Newsom to back away from his commitment to backfill the federal incentives.
State regulators launched rulemaking last week on new vehicle emissions standards — including the possibility of reviving an EV sales mandate — that they hope to complete by summer 2027. But those rules wouldn’t be submitted for the federal approval needed to enforce them until 2029 — if a Democrat wins the 2028 presidential election.
Even without sticks, EV advocates say they still have a trump card — the looming Chinese EV market behemoth. Chinese companies like BYD have rapidly grown into the world’s largest EV manufacturers, and while high tariffs have kept them out of the U.S. market, even American auto executives admit they pose an existential threat.
“The Chinese make 30 million cars a year, and they could make 50 million if they could find a market for them,” said Mike Murphy, a veteran Republican consultant who founded a nonprofit that supports increased electric vehicle adoption. “If we want to have an auto industry, we have to figure out how to compete in EVs.” — AN
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DON’T MAKE ME SAY IT: An oil giant is taking California to court.
Exxon Mobil sued the state on Friday over its first-in-the-nation climate disclosure laws, reports Lesley Clark for POLITICO’s E&E News. The corporation is arguing that the new rules will force them to use frameworks that disproportionately blame large companies for climate change.
“California may believe that companies that meet the statutes’ revenue thresholds are uniquely responsible for climate change; but the First Amendment categorically bars it from forcing ExxonMobil to speak in service of that misguided viewpoint,” the company wrote in its suit.
SB 253, the first bill the firm is taking umbrage with, would require corporations with at least $1 billion in revenue to report carbon emissions across their supply chains beginning in June 2026, according to draft guidelines. Its companion measure, SB 261,would require businesses with revenues of more than $500 million to disclose climate-related financial risks starting in January.
The California Air Resources Board is expected to finalize the disclosure rulemaking early next year
Last year, the U.S. Chamber of Commerce filed a suit similarly arguing First Amendment infringement. That litigation has failed to block the rulemaking process and an appeal is pending in the 9th U.S. Circuit Court of Appeals.
Newsom’s office pointed to that ongoing court case to defend the laws.
“Truly shocking that one of the biggest polluters on the planet would be opposed to transparency,” said Tara Gallegos, a spokesperson for the governor. “These laws have already been upheld in court and we continue to have confidence in them.” — LC, NB
REFLECTION SEASON: Dozens of conservation and environmental justice groups are looking back on this year’s legislative session — and not liking what they’re seeing.
“Under the guise of ‘affordability’ and ‘abundance,’ you enacted the most regressive policies in generations,” the groups, including the Center on Race, Poverty & the Environment, the Central Valley Air Quality Coalition and the Leadership Counsel on Justice & Accountability Action, wrote to Newsom and the Legislature in a letter on Monday.
They called out in particular this year’s passage of SB 131, which overhauled the California Environmental Quality Act in the name of building more housing, and SB 237, which cleared the way for more oil drilling in Kern County. — CvK
MILKING IT: A historic $40 million settlement with environmental groups in January was supposed to mark the end of most cattle and dairy farms in Point Reyes National Seashore. But it didn’t stop Health and Human Services Secretary Robert F. Kennedy Jr. from getting involved, Heather Richards reports for POLITICO’s E&E News.
Kennedy has told people he’s enlisted Interior Secretary Doug Burgum, who’s dispatched Wyoming lawyer and Interior political appointee Karen Budd-Falen to broker a Point Reyes solution.
It’s unclear what exactly the team could do. Most of the ranchers in the settlement have already closed operations and moved away. And some of them have sent a letter to GOP lawmakers investigating the settlement asking them to back down, calling the agreement the only “viable option” after years of litigation and uncertainty.
But the fight seems tailor-made for Kennedy’s “Make America Healthy Again” agenda, which in part emphasizes small farms and weaning people off processed foods, something that also resonates deeply in Marin County. He got involved after appeals from one of the region’s pioneering organic dairy farmers, Albert Straus, and a wellness influencer named Chadwick Conover.
“It was the first glimmer of hope that I had that we could do something,” Straus said of Kennedy’s interest. — HR, CvK
BUMPY ROAD: Rivian’s announcement last week that it plans to lay off more than 600 workers was the latest blow in a year of bad news for the Irvine-based company.
The luxury electric SUV and truck maker has failed to replicate its 2024 quarterly sales at any point this year, according to data from the California New Car Dealers Association. Rivian’s sales through September are 3 percent lower compared to the same period last year, even with the sales boost driven by the expiring federal incentives.
Meanwhile, its most popular model — the R1S — has slipped from seventh to ninth on the EV sales list amid competition from new offerings like the Honda Prologue.
Rivian plans to add a $45,000 SUV and an e-bike to expand its consumer base, but the company faces an uphill fight to reverse $1.1 billion in losses during the second quarter. — AN
CAP AND RETURN: Newsom appointed Emily Wimberger chief of staff and policy advisor to new California Air Resources Board Chair Lauren Sanchez on Friday. Wimberger was a cap-and-trade expert at CARB from 2019 to 2023, then worked at Rhodium Group and Hua Nani Partners. — CvK
— PG&E is making major upgrades in the San Jose area as it braces for data centers to drive a sharp uptick in energy demand in the city.
— Tarantula mating season is in full swing and it’s a bad time to be a male spider.
— For the first time ever, California wildlife officials euthanized four gray wolves that had been preying on livestock in Northern California.
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