Electrifying light-duty trucks will lower the cost of the electric vehicle transition, according to new research.
In the early 2000s, the Hummer became a symbol of cars at their environmental worst. One of these gas guzzlers consumed as much fuel per mile as five Toyota Priuses. The surge in sales of light-duty trucks, especially SUVs, throughout the 1990s was seen as a scheme to avoid the more stringent fuel economy standards applied to cars. Consumers loved these vehicles, but advocates for cleaner air and a cooler climate did not.
But new research now shows that it may be time for environmentalists to embrace trucks and their siblings. Cutting US transportation emissions without them will be tough.
Policy leaders in the US are starting to put very aggressive climate goals on the table that will require widespread electrification of transportation within the next 30 years. President Biden wants net zero emissions economy-wide by no later than 2050. California Governor Newsom has declared that all sales of light-duty vehicles (generally consumer vehicles such as sedans, crossovers, light trucks, vans) shall be zero emissions vehicles by 2035.
Recent national and state studies show ways these aggressive goals could be met. These studies describe what’s possible, but they can leave policy makers scratching their heads about how to turn the scenarios into reality. In 2019, 17 million new light-duty vehicles were purchased in the US. While regulations help shape this market—you can’t choose to buy a car that burns leaded gasoline or lacks a seatbelt— consumers still have many choices.
Rebates for new electric vehicle purchases are one popular tool available to policymakers. Research by Erich Muehlegger and David Rapson, summarized by Max Auffhammer here, shows that rebates have been a very effective way to boost demand for electric vehicles. However, relying on rebates alone is very expensive. Severin Borenstein and Lucas Davis have shown that electric vehicle rebates are also very regressive.
Now a new study by Muehlegger and Rapson, plus James Archsmith, shines light on factors that may be even more important than rebates.
Big Regional Differences
The authors draw on a survey of over 200,000 new vehicle buyers, conducted annually by a third-party firm. The surveys provide insights on the purchase decisions and demographic information about the buyers. The authors use this data to develop a model that estimates the likelihood that a consumer would buy an electric vehicle. The survey data illustrate how dramatically the popularity of different vehicle types varies across the country. Anyone enjoying a post-COVID, cross-country vacation will observe this. Sedans are popular in California and in the northeast, but trucks, including SUVs and pickups, dominate everywhere else. Their model accounts for these differences.
They also highlight a disconnect in today’s electric vehicle market. Most buyers want trucks, but most electric vehicle models are sedans. Whether and how this disconnect is resolved proves to be a critical factor in their model.
Archsmith, Muehlegger and Rapson use their model to estimate the aggregate amount of rebates necessary to hit different market share goals by 2035 — 20%, 35%, 50%.
Intuitively, the model finds that when a consumer is on the fence about buying an electric vehicle, a relatively small rebate can nudge them to do so. But rebates need to be really high to convince someone to buy a vehicle they do not want. Would someone who really likes full-size pick-up trucks instead drive a small, Chevy Bolt even if it were free?
The authors consider how interest in electric vehicles might increase as technology improves and charging infrastructure is expanded. Then they estimate how the amount of rebates could change. They find that if interest grows quickly, then rebates to encourage electric vehicle purchases might not be required at all. But in other plausible scenarios, trillions of dollars of rebates would be necessary to achieve a 35 percent market share for electric vehicles by 2035.
A point that Archsmith and coauthors make strongly is that the US vehicle market needs electric light-duty trucks. Their model shows that the strong preference that many consumers have for trucks means that the availability of attractive, cost competitive electric trucks could double the market share of electric vehicles over the next 15 years.
Full-size electric pickup trucks and SUVs are arriving in the next 18 months — the Tesla Cybertruck, Rivian R1T, Ford F-150, and, yes, the electric GMC Hummer. This new study suggests that these vehicles could be game-changers.
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Suggested citation: Campbell, Andrew. “A Pick Up for the Electric Vehicle Market” Energy Institute Blog, UC Berkeley, July 19, 2021, https://energyathaas.wordpress.com/2021/07/19/a-pick-up-for-the-electric-vehicle-market/
Andrew Campbell is the Executive Director of the Energy Institute at Haas. Andy has worked in the energy industry for his entire professional career. Prior to coming to the University of California, Andy worked for energy efficiency and demand response company, Tendril, and grid management technology provider, Sentient Energy. He helped both companies navigate the complex energy regulatory environment and tailor their sales and marketing approaches to meet the utility industry’s needs. Previously, he was Senior Energy Advisor to Commissioner Rachelle Chong and Commissioner Nancy Ryan at the California Public Utilities Commission (CPUC). While at the CPUC Andy was the lead advisor in areas including demand response, rate design, grid modernization, and electric vehicles. Andy led successful efforts to develop and adopt policies on Smart Grid investment and data access, regulatory authority over electric vehicle charging, demand response, dynamic pricing for utilities and natural gas quality standards for liquefied natural gas. Andy has also worked in Citigroup’s Global Energy Group and as a reservoir engineer with ExxonMobil. Andy earned a Master in Public Policy from the Kennedy School of Government at Harvard University and bachelors degrees in chemical engineering and economics from Rice University.