In the latest report from California New Car Dealers Association (CNCDA), zero emission vehicle (ZEV) registrations posted a decline for the third quarter in a row. As defined by the current CARB regulations, total ZEV sales (PEV—plug-in electric vehicles) dropped to 22.3% of all new light duty vehicle (LDV) registrations, the lowest level since 2022:Q4. Using a different data source which they currently deem preliminary and subject to revision, the Energy Commission put ZEV market share at a somewhat lower 21.6% of sales. Battery hybrids (HEV) in contrast continued their recent surge to an all-time high of 20.4%.

The same pattern was also seen in the national numbers, with PEV sales down to their lowest level since 2023:Q1 at 8.8%, while HEV sales also reached a new high at 12.8%.

The decline in PEV market share came as the result of a pullback in the PEV volume combined with growth in the overall LDV base. Total LDV registrations were up 6.6% in the first half of the year compared to the same period in 2024, finally showing growth in a primary driver of state and local sales tax revenues. The CNCDA report, however, expects total registrations for the year to be 1.7% lower overall in response to shifting tariff policies, continuing high vehicle prices, and uncertain trends for household disposable incomes. Counterbalancing these factors in the longer run, however, regulatory reforms including the effective repeal of the CAFÉ standards provide opportunities for producer cost savings and greater flexibility in vehicle offerings, particularly within the new car component of the market.

The rapid shift to hybrids is a case in point. While electric vehicles mandates have been undermined as sales of these vehicles hit a market plateau, consumers instead have turned to hybrids, both PHEVs and HEVs, which combined have matched or outsold BEVs in last 3 quarters. Consumers are adopting alternative powertrain vehicles, just not the ones the agencies tried to determine would be best for them.

By the numbers, PEV registrations were down 5.4% compared to the first quarter, and down 7.7% compared to the same period a year ago.

Under the governor’s previous sales mandate, PEV market share was required to reach 35% in 2026, and subsequently increase to 100% by 2035. Rather than advancing towards this mandated level, PEV market share essentially stalled beginning in the second half of 2023 and has since retreated beginning in the second half of 2024, well before the recent regulatory and budget actions in Washington. 

Market share rose beginning with the IRA tax credits in the second half of 2022, but in fact was not boosted by sales but instead by leasing these vehicles in order to take advantage of a loophole in the law (and to some extent a second level loophole far less used but that allowed leasing and quick buyouts of those leases). Some commentators have indicated that they expect sales to rise in the current quarter before the credits expire in September, but the now short-shelf life of those credits was known in the second quarter and apparently had no such effect.

As stated in the Energy Commission press release, zero emission vehicles are “here to stay,” but under current market conditions and offerings, so apparently is their overall market share. Using demographics from the most recent Plug In America survey, electric vehicle owners tend more to be white (90%), non-Latino (94%), older (80% older than 44), higher income (68% of respondents with household incomes of $100,000 or higher), males (79%) living in single-family detached homes (78%). These numbers have not varied substantially over the past several survey years. This demographic in large part explains why the market share has stalled at its current levels. PEVs appeal to a defined part of the market, and that defined part is not growing. While the results indicate a common base for small talk at events in parts of the Bay Area and Westside LA, they do not in any way support schemes such as the now-shelved mandates previously ordered by the governor that would apply across the state. Lacking the authoritarian tools combined with a growing lower-cost coal-fired generation base and lower vehicle safety requirements such as supports a wider market in China, California and the US are not yet at the same level of market penetration. 

The EV cost premium, supported by the federal tax credits, also has shown little change. Based on the Kelly Blue Book average transaction price tracking, average prices for all vehicles have remained high but relatively stable since 2023. Average prices for electric vehicles have also remained essentially level in this same period, although in a somewhat wider band.