Learnings from California and China ZEV Programs

As India positions itself as a leader in the global ZEV transition, there is an opportunity to facilitate cross-regional learnings. Two regions that have served as good global examples are the state of California in the West and China, in the east, with both representing developed and emerging economy contexts. The learnings from the California and China experiences would offer India an opportunity to consider a mix of policies that would support the uptake of ZEVs while simultaneously spurring the development of a nascent industry that can bring with it important industrial growth.

California’s efforts to decarbonize road transportation have culminated in its ambitious 100% ZEV mandate by 2035, as part of its Advanced Clean Cars - II (ACC-II) rule, effective September 2022, targeting 35% new ZEV sales by 2026, scaling to 100% by 2035. While learning from California’s setbacks and successes, it is important to contextualize the state’s journey towards its 100% ZEV target.

Historically, the primary objective of California’s ZEV program has been to reduce local air pollution in the state by controlling and regulating emissions, beginning with tailpipe emissions from passenger cars and trucks. As part of this, California’s approach to ZEVs has transitioned as the technology advanced over time, beginning with the push for more efficient ICE vehicles, to EVs including plug-in hybrids, and finally, towards a 100% ZEV scenario. Along the way, in 2012 under the Obama administration, California joined the US EPA efforts to set national GHG standards for vehicles, along with a more stringent state regulation and an additional state specific revised ZEV mandate policy aimed at about 10% ZEVs by 2025. Through the following decade, the automotive industry began to make enhanced investments in EV technology and new EV models. This, along with the California ZEV policy ecosystem, has led to a rapid rise in new EV sales in California, reaching about 12.4% of new EV sales in 2021.

China’s ZEV landscape has also undergone tremendous shifts in the last decade, with the ZEV mandate being a nationally implemented policy, and in many ways drawing on the California experience. Like California, China’s ZEV mandate requires its automotive industry to continue pushing ZEVs into the consumer market, in addition to creating other programs, such as charging infrastructure deployment, as well as financial and non-fiscal policy incentives. In 2019, China had announced that 25% of its overall vehicle sales would be EVs by 2025. By the end of 2020, China maintained the largest EV fleet in the world, at a total of 4.5 million EVs. Since 2019, China’s EV fleet has grown 77%. In comparison, the global number of electric passenger vehicles has grown 42% from 2019 to 2020. Part of this tremendous growth can be attributed to China’s Ministry of Industry and Information Technology (MIIT), which finalized the New-Energy Vehicle (NEV) mandate which was first introduced in 2009. This was revised in 2017 creating NEV targets for automotive manufacturers in 2019 and 2021, which allowed for excess credits to be used to offset deficits in complying to the corporate average fuel consumption (CAFC) standards. As government subsidies become more expensive, this credit system, combined with China’s wholly

foreign-owned enterprise (WFOE) market entry model for foreign EV manufacturers (as compared to mandating joint ventures), has so far successfully generated a competitive EV sector in China’s vehicle market.

At the same time, India has led with innovations in public procurement to spur EV adoption in public transportation, and electrification of last mile passenger and freight mobility in cities. While the regions have unique differences, such as India’s large portfolio of two and three-wheelers compared to California, there are also common challenges such as electrification of hard-to-abate segments including medium and heavy-duty trucks. Both regions can provide important learnings on using innovative policy design and strategic public institutions to leverage EV technology and capital to accelerate EV deployment. A California-India ZEV Partnership provides a unique opportunity for policy design as a lever for vehicle electrification.

Research Objectives

  • Which policy pathways from global ZEV experiences in California, China and Europe can be contextualized for India?
  • What are the key building blocks for a ZEV transition pathway towards Net Zero 2070? Develop potential policy pathways for India’s ZEV transition analyzing their feasibility for and impact on both government and industry
  • Can a ZEV Credits Mechanism for manufacturers unlock strategic investments and deploy affordable EVs in India?
  • Provide a meaningful shared knowledge platform that can support continued California-India ZEV Policy Collaboration, ensuring an exchange of best practices from both regions