California & USA Set to Diverge Massively on Electric Vehicles?

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Steve Hanley, Larry Evans, and I spent an hour yesterday talking about the big Ford EV news of the week, broader implications and context around that, and where we go from here. As I was listening back to it, something else clicked.

One of our big takeaway conclusions was that things don’t look bright for the EV industry in the United States. Legacy automakers have struggled to make money on their EVs in the US, and they are not going to try harder now with a completely anti-EV US government. Ford is pulling back massively, GM is pulling back, and others are as well. This was to be expected, even if it’s very disappointing.

California’s right to require higher fuel economy standards than the US government, especially as the US government is abandoning fuel economy standards altogether, is important, but it’s caught up in a legal battle because of the Trump administration suing over it.

However, in the end, I think California will win that battle. States have the right to require cleaner technology to protect their air and water. Also, even if separate from this specific legal battle, I expect the state could come up with new ways to push the auto industry to electrify quicker within its borders. The state is consistently at the forefront of technology and progress, and it will look to remain there. California reached EVs having 29% of the auto market in the 3rd quarter, or 19.5% in the first half of 2025 if you want to avoid the big 3rd quarter boom. China is ahead of it with 36% EV share, but even Europe is just right there with California at 21% EV share. California won’t want to fall behind, it’ll want to speed forward.

So, what does all of that mean together? I think it means that we’re going to move into an even more divergent market, where California gets more and more EV models and EV market share continues to rise at a strong pace while the rest of the United States stagnates, or perhaps even sees declining EV market share as a result of more limited supply and weaker marketing.

Way back in the day, we used to talk about “compliance cars,” electric cars that were just built for the California market in order to meet requirements there. Back then, with battery prices much higher and the market much less mature, these EVs were not particularly compelling. However, with technology where it is today, electric cars can be super compelling while having great range and specs. So, we could really see a situation where California (like China) is getting one great electric vehicle model after another while the rest of the country is neglected and gets legacy ICE trash. Think that’s unrealistic? Will consumers elsewhere demand these EVs enough if California is getting them but other states aren’t?