California’s Governor Newsom just issued an executive order mandating that no new combustion engine vehicles will be sold in the world’s seventh largest economy beginning in 2035. This comes at the same time American consumers have made the combustion engine pick-up truck the profit and market share leader in the auto industry. The confrontation between government mandates and the American love for trucks is heading toward a collision! And even if your business does not have a California location it will be impacted.
Why is California pursuing electric vehicle dominance?
There are two overpowering reasons for Newsom’s mandate. The first is that California is on fire. Literally. In California, the debate over climate change being real and very damaging is over. Climate change has generated years of record heat waves that no amount of forest management can contain.
The second reason is economic. Clean tech is a growth engine for California and is a major reason the state has dramatically reduced greenhouse gas emissions while allowing it to rival China’s rate of economic growth.
California’s government mandates are reengineering the state’s grid around renewable energy and on-demand batteries. California’s government policies, like its successfully implemented mandate for the building of a million solar homes, have enabled solar and wind to win least-cost electricity generating competitive advantage. The combination of least cost renewable energy and price competitive batteries is California’s path for delivering cheaper electricity while also minimizing or eliminating blackouts.
California’s pursuit of clean tech is not just a government enterprise. California’s tech companies have embraced going green to win market share and economic advantage. From Apple to Netflix to SalesForce they are reengineering themselves, our lives and the world economy to be digital with zero emissions.
California’s clean tech success has made its massive fleet of fossil fueled vehicles their single largest source of climate changing emissions. This mirrors the nation’s situation as the shift from coal to natural gas by utilities have made transportation emissions America’s largest source of greenhouse gas emissions. With combustion engines now being California’s single largest source of emissions, and the economic opportunity for growing jobs and profits by selling electric vehicles, the reasons for Newsom’s outlawing the sale of new combustion engine vehicles beginning in 2035 are obvious.
Government mandates are not necessary but supportive
California is the reason why solar is the least-cost source of electricity generation. Their government mandates created a massive consumer market that enabled suppliers to develop manufacturing economies of scale and innovations that have achieved least-cost competitive advantage.
The state’s electric vehicle public policy will result in your business having electric vehicles because they will enable electric vehicles to win on cost compared to combustion engine vehicles. Today, electric vehicles are least-cost in terms of operating and maintenance costs. Because their manufacturing requires fewer parts and less labor it is only a matter of time before accelerating technology development delivers least procurement, cost competitive advantage. What government mandates like Newsom’s achieve is an acceleration in this path to least-cost leadership by attracting entrepreneurs and technologists to pursue electric vehicle profitability. When that happens, then your business will buy electric vehicles because they will save you money.
Preparing for an electric vehicle future
Moving from combustion engines to electric vehicles will be culturally disruptive. Consumers will initially reject this shift because they love their combustion engine trucks. Currently, most businesses see electric vehicles as risky compared to the certainty of using combustion engine vehicles.
But the shift to electric vehicles will occur because consumers will fall in love with their lower costs and the massive torque supplied at the speed of electrons. And eventually, when we finally realize autonomous electric vehicles, the love of driving will be replaced by a transportation system that is massively cheaper, easier, and safer. When that happens combustion engines and human driven vehicles will be like the black hardwired telephones only the boomer generation can remember.
But that is years into the future.
Today your business needs to get into the game. Look at what Walmart and Amazon are doing in making initial electric vehicle purchases. They are buying first generation trucks now. They are doing so to begin the process of moving up the learning curve toward a least-cost, zero emission technology future.
Begin your business research now on electric vehicles. Consider buying an electric vehicle to get experience managing range anxiety, the recharging rather than refueling processes and understanding your utility’s electricity pricing.
Getting engaged with this technology now will accelerate the learning curve required for your business culture to be open to the next generation of electric vehicles that will challenge combustion engine cars on price, operating/energy costs, and performance.