The state of California announced that it plans to ban sales of new cars and trucks powered by gasoline starting in 2035. Lauren Fix, The Car Coach, joins Yahoo Finance's The First Trade with Alexis Christoforous and Brian Sozzi to discuss.
BRIAN SOZZI: A decision in California may cause a ripple effect in the auto industry for years. The state will ban sales of new cars and trucks powered by gasoline starting in 2035. Let's rev up the analysis on this one with Lauren Fix, the Car Coach and automotive analyst. Lauren, good to see you this morning.
LAUREN FIX: Good to see you.
BRIAN SOZZI: What does this mean for the big three automakers in the lead up to this ban?
LAUREN FIX: Well, the big three automakers have been offering electric vehicles. The traction has not been great. The one with the most traction is obviously Tesla. Other brands from Europe have also had good traction, but not great traction. And across the US, we're only looking at 2% purchases, a little less actually than that of electric vehicles. So it should demand that everybody move to electric vehicles. As far as buying a new vehicle? That could lead to a lot of issues financially for people and for companies and for the state.
ALEXIS CHRISTOFOROUS: What do you see? I mean, look, California's governor made this decision in an effort to fight climate change, right? Environmentalists are getting behind this mandate. We should note it's a mandate. They're not putting it up to a vote for Californians to decide. It's one of the issues the Trump administration has with it. But on its face, is this a good thing? Should the auto industry be embracing this?
LAUREN FIX: It's actually not a good thing because-- what-- California is about 11% of the total sales in the United States. So as California goes, the rest of the country typically goes. If we remember back to the emissions standards, once they put those in place, that sort of mandated that they want to build one vehicle across the US and not more. But if you're expecting more electric vehicles to be sold, what they're really doing is putting a burden on the used car market.
You've looked at CarMax you just talked about. And they're increasing sales. Used car sales are 10% to 15% higher. Can you imagine what it's going to do to the cost of a used car in California? Remember, those people that can't afford a new car are looking at used cars. And you're making that cost to them higher. They're not simply going to go buy a new car even with an incentive.
And most of the brands have an incentive, but you've already lost it with Tesla and General Motors. Nissan is very close to losing that $7,500 tax credit. How can the average consumer who makes under $50,000 a year be able to afford an electric car? They can't. And then there's the cost of charging.
This all means that they're going to really jack up the prices of electricity. They've already got brownouts. They tell you big notifications to unplug your toaster. We've all seen that. So think about how this is going to impact when solar and wind are only 4% of what their usage is.
The rest comes from coal and from natural gas. And if he doesn't want that, the governor's demanding that he's going to have to be in power to make that happen. I have a gut feeling that if he's not in power, the next governor may reverse this.
BRIAN SOZZI: And, Lauren, but what does it mean for the price of new cars in the 15 years before this goes into effect? If I'm a Ford, if I'm a General Motors, Toyota, you name it, why not raise prices on new cars by $1,000 now, prepare for this eventually happening?
LAUREN FIX: Well, it's kind of what happened to the price of vehicles. They went up because the cost-- California sets the pace. So if they have to produce electric vehicles, they have to pay those carbon credits, which sometimes in the past, they were buying them from Tesla. That all gets figured into the price that you pay somewhere around $2,500 a car already.
So if they're going to increase that cost, that means no longer will the average price of a vehicle across the US be somewhere around $34,000. It could go up to closer to $40,000. Again, that makes it untouchable for some consumers. And that's not going to help. But also think about the repair shops. They're going to be very busy for a period of time if this goes into place.
And that's what's never really thought about is the little guy who runs a corner repair shop or does oil changes. He'll have less customers down the road, or she'll have less customers down the road. And so that could lead to an impact on the economy.
Also, a possibly a large group of people owning vehicles out of state. You can buy them in other states and then have them licensed in Montana or Maine or Nevada. And that has been done already. I know people that do that today in order to avoid the California taxes.
ALEXIS CHRISTOFOROUS: Yeah, not great to do that with your insurance company. But you're right, it does happen. But Lauren, look, Gavin Newsom's heart might be in the right place with this mandate. But if this isn't the way to go, then how can the automotive industry help reduce these emissions and help with the environment?
LAUREN FIX: Well, there's some actually some new technology. China had originally placed a mandate stating they wanted all electric vehicles. And, of course, they started producing them through their suppliers and other suppliers. Well, what they realized is they don't have the electricity to support it. So they started it, and they are building quickly as they can, nuclear power plants, to create electricity, which is kind of one of the things that Gavin Newsom didn't want.
So they found a new solution-- something called Blue Gas. And if you're in the investment world, you should start looking into that. It's a combination of CNG and hydrogen. And it is a good solution. They've already put $66 billion into a station in Shanghai and into creating more technology because they know that if they don't have the electricity and consumers can't plug in, there has to be another solution because there never is just one solution.
You will always have gasoline. You'll have diesel for trucks. You'll have electricity. You'll have CNG. You might even have algae. That's also being worked on right now.
BRIAN SOZZI: Lauren, real quick before I let you go. Battery day-- Tesla battery day continues to dominate my Twitter feed. A $25,000 Tesla. Is that exciting, or is that just hype?
LAUREN FIX: I think it's hype. He's always been known for the hype. How many promises he's made that haven't come to fruition. That's just how Elon Musk operates. It's his way to raise money, except it backfired this time, because Nikolai got in trouble, because of his false statements or the supposed false statements.
I think Elon got really smart and said, you know what. I don't need to be in this mix and lose billions of dollars. I think I'll bring this down to a more controlled message. And I think that's what he did this time, which was probably really smart from a legal standpoint.
BRIAN SOZZI: All right, we'll leave it there. Lauren Fix, the Car Coach and automotive analyst. Good to see you.
LAUREN FIX: Good to see you.