When Tulare resident Quentin Nelms heard California was offering a hefty state subsidy to help lower-income residents buy electric cars, he applied right away.
But it wasn’t as easy as he thought it would be.
Nelms spent four months on a waitlist before he was accepted into one of the state’s clean-car incentive programs in January. He qualified for $9,500 that he planned to use to buy a 2022 Ford Mustang Mach-E. But after discovering that several dealerships had raised the car’s price by more than $10,000 during the time it took to get the grant, he could no longer afford the roughly $53,000 cost.
“We got into this program and it’s not helping like it’s supposed to,” Nelms said. “It’s useless at this time because there’s nothing out there and the cars that you do find, everything’s gone up in price.”
Affordable and efficient electric vehicles are critical to California’s efforts to tackle climate change and clean up its polluted air — by 2035, the state plans to ban all new sales of gas-powered cars.
But the state’s incentives and rebates for lower-income people who purchase electric cars have suffered from inconsistent and inadequate funding.
This year’s funding for some of the programs ran out in April — the waitlists have been shut down because of the backlogs. And even for the rebates that are still available, the obstacles are substantial: Program administrators are inundated with requests for the money, resulting in months-long waits — at the same time that prices are surging and electric cars are in short supply.
The troubled state subsidy programs raise a crucial question: Can California enact a mandate that requires 100 percent of all new cars to be zero emissions when a large portion of the population can’t buy them?
If most Californians can’t afford to replace their old, higher-polluting gas-powered cars, many of Gov. Gavin Newsom’s climate goals are in jeopardy, along with statewide efforts to clean up the nation’s worst air pollution.
New electric cars range in price from $25,000 to $180,000. Many models, including Ford’s popular Mustang and F150 Lightning electric truck, are sold out, with long waiting lists.
“As California transitions to an electric future, these vehicle markups are definitely pricing our clients out,” said Maria Ruiz, a supervisor at the EV Equity Program, which was launched by a Central Valley coalition of clean-air advocacy organizations. “We’ve seen markups as high as $15,000. So that sadly has been a big challenge.”
So far, it’s unclear how successful the state’s subsidy programs have been in cutting greenhouse gases because the Air Resources Board has failed to adequately measure it, according to an audit by the state’s Legislative Analyst’s Office.
Since 2010, California has allocated more than $1.84 billion to a hodgepodge of three programs: the Clean Cars 4 All Program, the Clean Vehicle Rebate Project and the Clean Vehicle Assistance Program, according to Air Resources Board data. In exchange, over those 12 years, about half a million Californians have received grants or rebates for buying cleaner cars or replacing older cars.
The Clean Vehicle Rebate Project, which receives the bulk of the state’s funding, has distributed 478,364 rebates since its launch in 2010, while the Clean Vehicle Assistance program has assisted buyers in purchasing 4,438 clean vehicles since 2018. Clean Cars 4 All, which only serves residents in the state’s most polluted regions, has taken 12,800 pre-2007 model year cars off the road since its launch in 2015.
All of the programs, which award up to $7,000 or $9,500 toward the purchase of an electric car, have income limits. The rebate project is for residents with incomes up to $135,000. Clean Vehicle Assistance and most Clean Cars 4 All programs accept applications from residents with incomes at or below 400 percent of the federal poverty level — equivalent to $54,360 for an individual. (The U.S. Senate also appears poised to enact a $7,500 federal tax credit for individuals with incomes less than $150,000.)
“Before the pandemic and the rise in prices, we do have evidence that these (state) programs were sort of effective and encouraged people to buy electric vehicles,” said Erich Muehlegger, an associate professor of economics at University of California, Davis. “But the challenge right now is that these programs are facing really, really strong headwinds because of the high prices of electric vehicles.”
Muehlegger said supply chain delays and high demand have triggered a widespread shortage of new and used cars.
While pandemic-induced price hikes have hit both gas-powered and electric cars, he said the sticker shock is likely most extreme in the electric vehicle market due to higher demand and shortages of components, like microchips. Fewer electric cars are in supply, straining the market, creating long wait lists for new models and driving up prices for the new and used vehicles that remain on dealers’ lots.
“We have to make sure there’s a whole range of vehicles that are zero emission, and we’ve essentially got just a little over a decade to try to get there,” said Ethan Elkind, an attorney who directs the climate program at the Center for Law, Energy and the Environment at UC Berkeley Law.
The lack of inventory and high prices have forced some program participants like Nelms to give up the state money they qualified for. Nelms is no longer planning to buy a car anytime soon; he will keep using his 2016 Honda Civic for now — which means California lost the opportunity to replace a higher-polluting car with a zero-emission one.
“This program is what I was hoping to count on, but once all the prices were going up, that hope just kind of disappeared,” Nelms said. “Right now I’m not able to do anything, so I just had to let the grant go.”
In addition to the $9,500 in state money that would have gone to a dealer, Nelms knew he needed to scrape together other funds to afford the roughly $800 in monthly payments for a Mach-E. He was approved for a loan and planned on applying for another federal rebate program. His 20-year old son also picked up a part-time job to help with the payments.
But the dealership markups quickly changed Nelms’ mind. He didn’t want to risk having negative equity – when the amount of money owed on a car is more than the amount that it’s worth.
Though he had to forfeit the grant, he said he’d consider applying to the Clean Vehicle Assistance program again when the car market stabilizes.
For now, he said, he’ll have to pay high gas prices.
“Inflation, it’s never been this bad,” Nelms said. “There’s always things that happen in life that can hold you back, but that’s what growth is, having to work harder and push yourself and get through these tough things.”