Federal cuts, state response
When it comes to electrifying heavy-duty vehicles, the upfront price gap is the core problem. Our research has found that the average battery electric tractor-trailer in the United States sells for roughly 2.4 times the price of a diesel one. Battery electric vehicle (BEV) prices have come down for some vehicle classes, but they remain stubbornly high for the workhorses California most needs to electrify: Class 8 tractor-trailers, used for everything from freight delivery to construction. Hauling heavy payloads takes bigger batteries, and bigger batteries cost more. The arrival of the Tesla Semi at a retail price of $290,000 may signal a coming shift, but there is still a sizeable cost differential with diesel models, and fleets need help bridging the gap.
Until recently, federal incentives were helping to close the cost gap between diesel trucks and BEVs. Inflation Reduction Act tax credits offered up to $40,000 in purchase rebates for Class 4 vehicles and above before they were prematurely canceled at the end of September. That leaves state-level programs like California’s Clean Truck and Bus Voucher Incentive Project (HVIP) to do the heavy lifting. Since 2009, HVIP has awarded more than $1 billion in purchase rebates on a first-come, first-serve basis. Fleets are still sitting on more than $570 million in unredeemed vouchers from the latest funding round, which must be redeemed within the next 18 months—and 77% of those vouchers are earmarked for Class 8 BEVs.
To keep momentum on the heavy-duty side, California now plans to deploy $1 billion through a new Clean Fuel Reward (CFR) program, funded by Low Carbon Fuel Standard (LCFS) credits from residential charging of electric vehicles. These point-of-sale rebates will help narrow the total cost of ownership (TCO) gap between battery electric and diesel trucks. TCO is a key metric for fleet operators’ purchasing decisions that considers purchase price, infrastructure costs, operating costs, and resale value over a 3–5-year period.