What you should know about the new electric vehicle rule

The Biden administration on Wednesday published a rule that’s expected to drive a significant shift away from gas-powered car sales and toward electric vehicles. 

For consumers, this is expected to mean more available and affordable EVs. Some analysts say it could also have the opposite effect on gas-powered cars, making them pricier and less available.

“Purely gas-powered vehicles will get more expensive,” said Sam Abuelsamid, the principal research analyst for mobility at market intelligence firm Guidehouse Insights, in an email.

But, he noted, hybrids and electric cars will “decline in cost.”

This is because it will be harder for gas-powered cars to keep up with the Environmental Protection Agency's (EPA) standards, which ratchet up over time, and they’ll need “more advanced technology that will drive up prices,” he said.

At the same time, he noted, automakers producing EVs in larger quantities means that the cost for each one will come down. 

Other analysts disagreed. Amaiya Khardenavis, an EV charging infrastructure analyst with Wood Mackenzie, said he doesn’t expect prices to rise for gas-powered cars because the technology is already there.

"We're already at mass market with ... [internal combustion engine] vehicles. So whatever we will see in the future is that prices for EVs will come below gas cars, but we will not expect prices of gas cars to go above ...where they are today," Khardenavis said. 

The Biden administration said the rule issued on Wednesday could result in just 29 percent of the new car market remaining gas-powered in 2032. In the administration's lowest-cost scenario, it estimated that in that year, 56 percent of vehicles would be battery electric, 13 percent would be plug-in hybrids and 3 percent would be other hybrids.

The rule does not explicitly mandate a shift toward electric vehicles or any other specific vehicle type. Instead, it sets pollution standards for an automaker’s vehicle fleet that would be difficult to achieve without increasing the share of electric or other low-carbon vehicles. 

Chris Harto, a senior policy analyst for transportation and energy at Consumer Reports, noted that since the rule is not a mandate, automakers will have at least some wiggle room to find the mix of technologies that best matches up with consumer demand.

“There is flexibility ... — if battery electric vehicles sales lag for some reason — to deploy more hybrids or plug in hybrids or alternative technologies,” Harto said. 

“There's a lot of room to let the market decide within the structure of these rules, and for different automakers to take different strategies,” he added. 

The rule received praise from a major lobby group for the auto industry, which said that the Biden administration made the right choice in slowing down near-term targets in the shift to EVs.

“These adjusted EV targets – still a stretch goal – should give the market and supply chains a chance to catch up. It buys some time for more public charging to come online, and the industrial incentives and policies of the Inflation Reduction Act to do their thing,” said a written statement from John Bozzella, president and CEO of Alliance for Automotive Innovation.

“And the big one? The rules are mindful of the importance of choice to drivers and preserves their ability to choose the vehicle that’s right for them.”

But Abuelsamid said that automakers will have a hard time hitting the targets with just gas-powered vehicles, which could become increasingly rare. 

“Getting the customer desired mix of performance along with the efficiency with gas only will be tough at any price,” he said. “I suspect that gas only vehicles will become more scarce, but hybrids should be able to easily meet consumer demand.”

Khardenavis said his organization’s projections for electric vehicle demand is relatively in line with what the EPA has projected — meaning there is unlikely to be a scarcity of gas-powered cars. 

He said the demand for gas-powered cars “is only going to slow down.”

However, the rule may meet a legal challenge in the near future, with oil industry trade groups already threatening action. So it’s not clear whether the rule will ultimately survive. 

And if Trump — a vocal opponent of electric vehicles and Biden administration policies aimed at promoting them — wins the presidential election in November, he could try to undo the standards.

Nevertheless, Corey Cantor, EV analyst at BloombergNEF, said that the existence of the rule at all is likely to push automakers toward preparing for an EV-driven future. 

“Automakers really have to make sure that they're not waiting too long if the rest of the market moves towards more clean vehicles, and then they're kind of left holding the bag, or paying those fines or potentially not competing,” Cantor said.