New California law will make it easier to finance electric trucks, buses

By Michael Colvin and Lauren Navarro

Gov. Newsom signed a new law today that will help accelerate the much-needed transition to electric trucks and buses. In addition to transforming the California market and cleaning up the state’s air, this law can serve as a national model for other states interested in accelerating the adoption of clean trucks and buses.

The new law, Senate Bill 372, directs the California Air Resources Board and the state treasurer’s office to offer a suite of financial incentives to help owners of medium- and heavy-duty trucks and buses pay for the costs of replacing their diesel-fueled fleets with cleaner, zero-emission alternatives. Examples include a loan loss reserve, credit enhancements, performance warranties and sale guarantees.

What is particularly innovative about this new law is that it uses the public dollar to attract private capital in ways that traditional rebates do not. Research indicates that this leverage will be critical to getting clean trucks and buses on the road at scale.

Accelerating the adoption of cleaner vehicles is critical because medium- and heavy-duty trucks create massive amounts of air pollution. This pollution deteriorates air quality and can cause serious health problems for people who suffer from asthma and other respiratory conditions. The pollution is particularly bad along shipping routes and near warehouses, many of which are located in and around low-income communities. So, replacing these vehicles with cleaner, zero-emitting versions will immediately reduce air pollution for populations living nearby. SB 372 ensures that 75% of the state’s financial products offered as part of this legislation go to underserved communities.

Along with cleaner air, zero-emission vehicles have economic benefits for fleets as well. Zero-emission vehicles end up costing less than their diesel counterparts because of fuel savings and because they require less maintenance. However, the higher up-front purchase price has often been a hindrance to widespread adoption.

Historically, California has offered rebate programs to businesses that buy electric trucks and buses as a way to help offset the up-front purchase costs. But the waiting list for these programs is long, and research indicates that many more options are required to address the wide range of needs and risks facing fleet owners. The new law allows these options to be combined or strategically stacked on top of each other to give more bang for the buck.

SB 372 also creates a one-stop-shop website to help transparently see the various options that can be combined. This allows the buyer to coordinate with relevant local grants, federal tax incentives and other revenue streams to help offset the financing costs.

California has a diverse set of fleet owners, ranging from multi-billion-dollar companies to small mom-and-pop shops. Transitioning these fleets should be straightforward and equitable, both for the communities who live in areas with high concentrations of diesel pollution, and for the business owners who manage these vehicles. Just as there are many types of home and business loans, there too should be many types of financing options for purchasing zero-emission vehicles.

This new California law offers innovative financing solutions that are much-needed to accelerate demand for electric trucks and buses, while reducing barriers to investment. Moreover, because SB 372 was unopposed and received strong bipartisan support in the legislature, it could serve as a good model for other states. This new law will help ensure that the transition to the zero-emission future happens quickly, while making it more affordable and approachable for all.