A pivotal legal and regulatory battle is unfolding in the United States, one that could reshape the trajectory of the automotive industry, particularly in the electric vehicle (EV) sector. At the heart of this conflict lies California’s Advanced Clean Cars II (ACC II) mandate, which stipulates that 35% of new vehicle sales must be zero-emission by 2026, escalating to 100% by 2035. While this initiative originates at the state level, its ramifications extend far beyond California’s borders.
California’s ACC II Mandate: A Catalyst for Change
In 2022, the California Air Resources Board (CARB) approved the ACC II regulation, setting a progressive roadmap for zero-emission vehicle (ZEV) adoption. The mandate requires that starting in 2026, 35% of new passenger cars, trucks, and SUVs sold in California be ZEVs, increasing annually to reach 100% by 2035. This regulation applies to automakers and covers only new vehicle sales, not affecting existing vehicles on the road.
The ACC II rule not only accelerates the transition to cleaner transportation but also influences national policies. Under Section 177 of the Clean Air Act, other states can adopt California’s vehicle emissions standards. As of April 2025, 17 states plus the District of Columbia have adopted, fully or partially, California’s vehicle regulations. These “CARB states” represent over 30% of the U.S. auto market, effectively giving California’s policies nationwide significance.
Legal Challenges and Federal Pushback
The ACC II mandate has faced significant legal and political opposition. On December 18, 2024, the Environmental Protection Agency (EPA) granted California a waiver to implement the ACC II program. However, in May 2025, Congress passed resolutions to revoke the EPA waivers, effectively nullifying California’s stricter vehicle emissions standards. This move has sparked a contentious debate between state and federal authorities over environmental regulations and states’ rights.
California’s Attorney General has indicated plans to challenge the revocation, arguing that the state has the authority to set its own emissions standards under the Clean Air Act. The outcome of this legal battle will have profound implications for the future of vehicle emissions regulations in the U.S.
Implications for Automakers
The ACC II mandate presents both opportunities and challenges for automakers.
EV-First Manufacturers:
Companies like Tesla, Rivian, and Lucid stand to benefit from the mandate. Not only does it secure long-term demand for their vehicles, but it also allows them to sell compliance credits to traditional automakers struggling to meet ZEV requirements. For instance, Tesla has generated significant revenue from selling zero-emission vehicle credits, amounting to nearly $10 billion since the end of 2018.
Legacy Automakers:
Traditional automakers such as Ford, General Motors, Toyota, and Stellantis face the challenge of accelerating their EV development to comply with the mandate. Failure to meet the ZEV sales requirements could result in substantial penalties—up to $20,000 per noncompliant vehicle sold . Alternatively, they may need to purchase credits from EV-focused manufacturers, adding to their compliance costs.
Market Dynamics and Consumer Behavio
The transition to zero-emission vehicles is not solely dependent on regulatory mandates; consumer acceptance plays a crucial role. Recent reports indicate that EV sales in California have stalled, raising concerns about meeting the 35% ZEV sales requirement by 2026. Factors contributing to this slowdown include high vehicle costs, limited charging infrastructure, and consumer range anxiety.
Moreover, some states that had adopted California’s standards are reconsidering their positions. For example, Vermont’s governor paused the state’s adoption of California’s strict EV sales mandates, citing inadequate charging infrastructure and underdeveloped technology for heavy-duty EVs. Such decisions reflect the complexities involved in transitioning to a zero-emission transportation system.
The Road Ahead
The unfolding legal and regulatory developments surrounding California’s ACC II mandate will significantly influence the direction of the U.S. automotive industry. A favorable outcome for California could accelerate the nation’s shift toward zero-emission vehicles, prompting increased investments in EV technology, infrastructure, and supply chains. Conversely, a rollback of the mandate may slow progress, leading to a fragmented market with varying standards across states.
Automakers, policymakers, and consumers alike must navigate this evolving landscape, balancing environmental objectives with economic and practical considerations. The decisions made in the coming months will shape the future of transportation in the United States for decades to come.
