The transition to electric vehicles will not be linear. It will accelerate by the day, says a new report, and will account for more than half of new car sales by 2030.
The study comes from Bloomberg NEF. Analysts there credit changes in the electric vehicle tax credit passed in August for the number. Before the Inflation Reduction Act was passed in August, projections for electric vehicle sales were 43% of the U.S. market by 2030, Bloomberg says. “With the existing climate spending measure, this estimate has been revised up to 52%.”
Law removes discount caps
The law entitles buyers of some new electric cars to an upfront rebate instead of a post-sale tax refund. Also, under the old system, an automaker could only sell 200,000 EVs with the discount. Under the new program, this cap is gone.
See: Americans want tax incentives for electric vehicles. But are they willing to lose gas cars forever?
EV production is shifting to the US
It also introduces new restrictions that mean few electric cars are eligible for the loan in the short term. EVs must be built in North America to qualify. Few are, but automakers have already begun moving production to the US to ensure their vehicles are eligible for the rebate.
The law also introduces an escalating requirement that battery components must originate in the US or its major trading partners, excluding China from the supply chain for electric vehicles sold in the US. According to industry analysts, this will be the most difficult for the auto industry to meet.
Bloomberg notes that “the three automakers with the largest domestic battery production are coming online in the near future – Tesla TSLA,
and Ford F,
— will benefit the most from the new law” because they come closest to complying with trading rules.
The law also introduced price and income caps to ensure its benefits contribute to lower electric vehicle prices.
See also: Biden at Detroit Auto Show: First $900 million to fill gaps in EV charging network is on the way
Analysts: Not much has changed this year. Then it accelerates.
In 2021, less than 5% of new cars sold in the US were electric, according to Bloomberg. However, studies have shown that the adoption of electric vehicles takes snowballs.
“In the next year or so, there shouldn’t be too much of a difference [in sales]’ said BloombergNEF electric car analyst Corey Cantor. “Later in this decade, we expect that not only the EV tax credit, but also the battery production tax credit will lead to a larger decrease in the cost of EVs.”
Read: The stock of new cars has finally increased; what it means for car buyers
Several states need to pass after 2030 to achieve a more aggressive target. California, Massachusetts, New York and Washington have all taken steps to require 100% of new car sales to be electric by 2035.
This story originally continued KBB.com.