LOS ANGELES — As California pushes toward its goal of transitioning gas-powered passenger vehicles to zero-emissions electrics, the Air Resources Board is considering changes to the Clean Vehicle Rebate Project that has helped hundreds of thousands of residents buy in.

On Thursday, the ARB outlined several scenarios it is considering for the program, including a cap on the prices of eligible cars, reduced rebate amounts and decreased income thresholds. The changes could take effect as early as next February.

What You Need To Know

  • The California Air Resources Board is considering changes to its Clean Vehicle Rebate Project

  • The CVRP currently grants rebates of $750 to $4,000 to buyers of plug-in electric vehicles 

  • Starting next February, the CVRP could reduce the rebate by $250, lower the income threshold for buyers and cap the MSRP of eligible vehicles

  • Eligible EVs could be capped at $40,000 for cars and $60,000 for pickup trucks, SUVs and minivans

In July, the CVRP program was allocated $525 million in the state budget — an amount that needs to be stretched for three years. CVRP administrators say $650 million is needed to meet projected demand, so the agency is looking at ways to save at least $135 million without compromising the state’s EV buyership goals.

California is on track to reach 1 million EV registrations before the end of 2021 and 1.5 million by 2025, according to the Center for Sustainable Energy in San Diego. But the state is projected to fall short of the 5 million EVs former Governor Jerry Brown had called for by 2030, and it has an even longer way to go to reach Gov. Gavin Newsom’s mandate that 100% of new passenger vehicle sales in the state be zero emissions by 2035. More than 15 million passenger vehicles are registered in the state.

“We need to design CVRP in a way that not only lives within its means but also continues to incentivize EV purchases,” ARB Air Pollution Specialist Raquel Leon said Thursday, during an online public work group that outlined five possible scenarios.

All five scenarios would lower the price cap for eligible vehicles to a manufacturer’s suggested retail price of $40,000 for cars and $60,000 for pickup trucks, SUVs and minivans. Such a move would discontinue eligibility for three vehicles that are currently on the market: the Polestar 2, BMW i3 (which is ending production this summer) and the Ford Mustang Mach-E, which the U.S. Environmental Protection Agency classifies as a small wagon.

“One of the reasons we’ve added the reduction for MSRP across all of the scenarios is that it gets at the bottom-line principle of making sure we’re focusing incentives on cars that are more affordable and stretch the rebate to as many low-income consumers as possible,” said CVRP manager Lisa Macumber. 

In addition, plug-in hybrid electric vehicles would no longer be eligible starting in 2023.

Many of the scenarios would also lower the income cap for eligibility in two stages: once in February 2022 and again in February 2023. Under the most extreme income cap reduction proposal, which could take effect as early as next February, buyers would need to make no more than $120,000 for single filers, $162,000 for heads of household and $185,000 for joint filers

Right now, the income cap to qualify for the rebate is $150,000 for single filers, $204,000 for heads of household and $300,000 for joint filers.

The rebate amount could also be reduced by $250. Current rebate amounts range from $750 for battery-powered motorcycles and scooters to $2,000 for battery-electric cars and $4,500 for hydrogen fuel cell electric vehicles. The reduced rebate amount would apply to all rebate types.

Of the different strategies it is considering, the lowered rebate amount and lowered income caps yield many of the results the program is looking for. “It would have a large effect on rebates and rebate volumes and a moderate effect on sales,” said John Anderson, senior manager of the Center for Sustainable Energy, which administers the CVRP for the California Air Resources Board.

California initially created the Clean Vehicle Rebate Project in March 2010, just before the Nissan Leaf and Chevrolet Bolt came on the market and ushered in the modern-day EV era. It has so far provided 350,000 rebates on eligible vehicles, ranging from plug-in electric hybrids like the Hyundai Ioniq to battery electrics such as Tesla and hydrogen fuel cells, including the Toyota Mirai.  

The CVRP rebates were “extremely important” in making it possible to acquire a plug-in EV for 48% of EV buyers in 2017, according to the Air Resources Board; 57% of California EV buyers would not have made the purchase without it.

Despite its popularity, the program has repeatedly come under fire for underfunding. For years, California electric vehicle buyers have bought or leased cars that were eligible for the CVRP rebates only to have to wait months to receive them. This year has been no exception. Applications the CVRP received after April 23 have been waitlisted.

As of August 19, 12,663 applications had been waitlisted, the ARB said, requiring $33 million in funding. 

“Applicants on the CVRP rebate waitlist understand and agree that an application placed on a waitlist may be subject to new Terms and Conditions and new CVRP Implementation Manual requirements should funding become available,” the CVRP website currently states. “As a result, there is no guarantee that you will be eligible for a rebate.”

The past year has been especially challenging for the Clean Vehicle Rebate Project. While COVID initially led to a lull in demand, it also led to a loss of staff to process rebate claims. That problem was compounded when Newsom’s budget failed to allocate any funds to the CVRP earlier this year, prompting the Air Resources Board to prepare for its closure, including a hiring freeze. 

It was only in July that the state budget included $525 million for the CVRP, allowing the program to begin hiring staff to reduce rebate processing times. CVRP is allocating $10 million of those funds for a new electric bicycle incentive it plans to offer; the rest is for the electric passenger vehicles it has typically incentivized through the program.

If CVRP were to continue with current rebate levels at the current level of budgeting for the next three years, it would be unable to fund 48,000 rebates, based on projected EV demand in the state, according to the Center for Sustainable Energy.

The Air Resources Board will make its final recommendations about funding for the 2021-2022 fiscal year in November.