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California Requires Automakers to Sell All Electric Vehicles

Chrysler plans on releasing an all electric car soon that has almost no chance of making a profit or even finding very many customers. While this may not make much financial sense, Chrysler has no choice but to put this car into the marketplace, California requires it by law. California has had rules on the books for the last two decades whose sole purpose is to improve the smoggy air that plagues the states biggest cities. California is looking to the future as well, hoping to keep global warming at bay, which could threaten their coastline. 

The California rules require automakers to sell some vehicles that produce little to no exhaust from the tailpipe. Automakers are mainly producing electric and hydrogen fuel-cell cars but most of the major automakers will be selling electric vehicles by the end of next year.  

This year, California’s rules are becoming more stringent. In past years, automakers were allowed to get credits if they sold large numbers of high-mileage cars such as hybrids without actually selling any pure electric vehicles. Unfortunately for carmakers, those credits are being phased out so it is no longer possible for automakers to avoid putting full electric cars on their showroom floors.

The recent Los Angeles Auto Show put the latest electric models on display. Chrysler unveiled a Fiat 500e subcompact which is their first battery-powered car. It will be on sale in California staring in 2013. In a statement released to the press, Chrysler Chief Executive Sergio Marchionne estimates that Chrysler will actually lose roughly $8,000 to $9,000 on each of the 500e it sells. The price of the vehicle has yet to be released.

Other manufacturers are getting into the electric market as well. GM is bringing a subcompact called the Spark out soon and Honda, Toyota, Ford and Nissan are also selling electric cars in the United States. Most of them are selling these cars to meet the California requirement but have a very real concern that they will be hard to sell to customers.

Carmakers have little choice but to honor the California requirements. California is a huge car market, accounting for almost 10 percent of the all auto sales in the U.S. California has also been a leader in the drive for zero emissions cars, so far 10 other states including heavyweights like New Jersey and New York have followed California’s lead. If automakers ignore these requirements they may be banned from selling vehicles in the state. 

The Federal government is getting involved as well. They are rewarding automakers for putting more electric vehicles in the marketplace. In addition they have enacted laws that require automakers fleet average to be 54.5 miles a gallon by 2025. Producing more electric vehicle can help them meet this requirement. 

The California rules use a complicated formula to determine how many zero-emission cars must be sold in the state. The final number takes into account credits for hybrids and other high-mileage vehicles the automaker has sold in the past. As a general example, if an automaker sold 100,000 cars in California per year they would need to sell a minimum of 1,000 battery powered electric vehicles starting in 2015.

California is hoping to have 1.4 million electric or hydrogen-powered cars on the road by the year 2025. This is quite a stretch from the 26,000 electric vehicles that have been sold across the entire country so far this year.

California requirements will dramatically increase the number of all electric cars automakers will need to sell in the state in the next few years. Eliminating smog and curtailing global warming are the main goals of the initiative.