California's Advanced Clean Cars II ZEV rules under fire

Automakers in the US are working toward finding a way to meet the ACC II rules. The industry must operate under the assumption that these regulations remain in effect until they are not. The penalty for missing the target is $20,000 per vehicle. Depending on sales, this could be a hefty fine. The three-year flexibility could delay the fine and perhaps eliminate it, if ZEV sales can be accelerated in subsequent model years.

Some automakers have indicated they are developing allocation plans which will include sending more PHEV and EV models to states which have adopted ACC II and fewer to those which have not. Though CARB officials have positioned the situation as less onerous, the target for 35% of 2026 model year vehicle sales in California would require a substantial increase in ZEV sales; for most of the other participating states, it is simply impossible. As a result, there is every likelihood that the other states could take steps not unlike what Maryland and Vermont have done. 

US EV sales continue to grow, consumers are increasingly interested and willing to buy, the number of offerings continues to grow, and there continues to be development in the public charging infrastructure. 

On the other hand, the current administration has proposed a bill which would end the US federal consumer EV tax credit on Dec 31, 2025. An early move by the administration was also to freeze distribution of federal funding allocated to support development of a national charging infrastructure, which could slow the development of supporting infrastructure. The Trump administration is working on new emissions and fuel economy rules which will be less stringent than what is in place today, though what specific form the new rules will take is not yet known.  

In 2024, California and the states who have signed on to implement ACC II for the 2026 model year accounted for 576,000 of the total EVs registered in the US, or 45% of all EVs registered, and 3.48 million total vehicles (23.6% of total US sales). Over the first quarter of 2025, these states saw just under 129,000 EVs registered (42% of all US EV registrations) and a total of 935,700 units registered and 23.2% of total US registrations. This includes Maryland and Vermont, as the gubernatorial executive orders delay assessment of fines but do not repeal the state laws. 

Automakers cannot simply walk away from these markets, while submitting to paying fines is also problematic. The industry is already facing massive pressure from new US tariffs, scale for EVs is coming slowly and affecting the path to profitability, and expanding their EV offerings continues to require significant capital investment. 

Of the states adopting ACC II for 2026 model year, five saw their EV market share decline when comparing first quarter 2025 to full-year 2024 EV share, which suggests the possibility that EV share is not going the direction necessary to meet the ACC II requirements. The state with the highest EV share is California, of course. In 2024, California reached EV share of 22.2%. Over the first three months of 2025, that share dropped to 19.6%. 

While this is on a calendar-year basis and ACC II counts share based on vehicle model year, at a state level, California EV demand is far from being able to support each automaker reaching 35% ZEV sales for the 2026 model year. The situation is worse for the other states which have signed on. Washington state’s share of EVs dropped from 17.5% last year to 16.0% in the first quarter of 2025. In New Jersey, EV registration share dropped from 10.8% in full-year 2024 to 10.0% in the first quarter of 2025. Oregon’s share improved, but as the gain was only 0.3% and brought the state only to 12.0% EV share, the gain was not meaningful in relation to this target. 

US buyers are also largely agnostic in behavior relative to whether their state is following the ACC II or not. California still leads the US in EV market share. In 2024, California’s EV registrations accounted for 31.1% of all US EV registrations. This was followed by Florida at 8.7% and Texas at 6.7%. For the first quarter of 2025, however, California accounted for 28.6% of total US EV registrations, followed by Florida at 10.0% and Texas at 8.0%. Both of those markets gained EV share, while California dropped. Both Florida and Texas also saw EV registrations take a larger share of first-quarter 2025 registrations than they did in 2024, though in both cases, the improvement was less than 1%. In absence of the states adopting California’s ACC II, their share of the EV pie is growing.

Ultimately, regardless of the back-and-forth as to what the regulatory standards are, consumers remain the primary driver of change. S&P Global Mobility noted during the period leading to the 2024 election that these regulations were likely to change regardless of which political party took office, and regardless of the makeup of Congress. The increasing communication from automakers, in some cases through lobbying groups rather than directly, as well as dealers about the inability of the industry to meet the immediate regulations reflects the reality that consumers have not yet adopted the technology in strong enough numbers to meet the regulations as they stand. The true roadblock to meeting these regulations is at the consumer level.