Making Sense of PEV Gasoline Reductions: A 2026 Perspective

Bottom Line Up Front: Plug-in electric vehicles (PEVs),[1] while a meaningful contributor to California gasoline demand reduction, are not the primary driver of that decline. Across all three scenarios modeled, PEVs account for less than two percentage points of a projected 7.3% total decline in California gasoline sales by 2033; fuel economy improvements, shifting travel patterns, demographic trends, and post-COVID behavioral changes account for the larger share. Notably, this finding is consistent regardless of which scenario is applied – even assumptions that differ by as much as 50% in PEV sales volumes produce nearly indistinguishable projections for total gasoline demand. The data and projections supporting this finding are presented below.

Stillwater has been monitoring PEVs for more than 15 years. The following summarizes the most recent findings: California PEV sales data for Q1 2026 are now available and are presented below in comparison with historical trends, along with an analysis of implications in the absence of the federal $7,500 purchase incentive. Q1 2026 was the first full quarter under these new market conditions; California’s Advanced Clean Cars II (ACC2) zero-emission vehicle (ZEV) mandate had also been invalidated under the Congressional Review Act in early 2025. California new ZEV registrations fell 40.2% year-over-year in Q1 2026, with ZEV market share dropping to 13.7% – the lowest level since 2021.

Figure 1 displays historical and projected PEV sales. Since future trends are uncertain, we developed three scenarios to estimate possible outcomes. The Baseline scenario follows Q1 sales patterns, while the other two reflect more optimistic and pessimistic projections. The High Sales scenario is set 33% above the Baseline and the Low Sales scenario 50% below it, together spanning a wide but plausible range of future PEV outcomes. As Figure 3 shows, however, even these substantially different assumptions produce nearly indistinguishable projections for total California gasoline demand.

Figure 1. Historic & Projected California PEV SalesSource: Stillwater analysis of California New Car Dealers Association (CNCDA) Q1 2026 Auto Outlook; Data Source: Experian Automotive

Figure 2 illustrates the scale and trajectory of PEV-driven gasoline displacement across all three scenarios. In 2025, PEVs reduced gasoline consumption by 760 million gallons (5.4%).[2]

Looking forward, gasoline displacement is estimated by projecting each of the three new vehicle sales scenarios forward along their respective trend lines. Under the Baseline scenario, cumulative PEV-driven gasoline displacement peaks by 2029, at which point the aging fleet retires faster than new sales replace it, causing displacement to gradually decline.

Figure 2. PEVs’ Historic & Projected Gasoline ReductionsSource: Stillwater analysis

Building on the displacement trajectories shown in Figure 2, Figure 3 plots projected total California gasoline demand under all three PEV scenarios. Despite the substantial differences in assumed PEV sales volumes (shown in Figure 1), the three resulting gasoline demand curves are nearly indistinguishable from one another. That is the core finding of this analysis: At current PEV penetration levels, the volume of gasoline displaced by PEVs is too small relative to total California demand for even wide swings in PEV adoption to meaningfully alter the overall gasoline demand trajectory. The larger drivers of projected decline – improved vehicle fuel economy, reduced vehicle miles traveled in response to higher fuel prices, demographic and population shifts, and changes in travel behavior following the COVID-19 pandemic – operate at a scale that swamps the PEV contribution across all three scenarios. (More detail on how the gasoline displacement attributable to PEVs is measured appears in the endnote below.)

 Figure 3. Historic & Projected California Gasoline DemandSource: Stillwater analysis

Conclusion

Following the expiration of the federal PEV purchase incentive, the PEV market is experiencing lower sales volumes and reduced policy support. Under these new conditions, projections suggest that future PEV sales will have only a minimal effect on gasoline consumption, amounting to less than a two percent drop by 2033. By that year, gasoline sales are expected to decrease by 7.3%, with PEVs responsible for 1.90% of that reduction. Looking further ahead to 2040, gasoline demand is projected to fall by 11.7% compared to 2025 levels, with PEVs contributing 1.34% of the 11.7% decline. This picture holds across all three scenarios modeled; the range of PEV adoption assumptions has negligible effect on the overall demand outlook. For further analysis of PEV market trends and their implications for California gasoline demand, contact Stillwater Associates.

An Endnote on How PEV Gasoline Reductions Are Measured

Quantifying gasoline reductions from PEVs can be complex because these reductions are already embedded in officially reported volumes. Figure 4 displays gasoline sales with and without PEVs, illustrating the displacement quantified in Figure 2. In 2025, for example, PEVs are estimated to have displaced 760 million gallons of gasoline, yielding a Low Carbon Fuel Standard (LCFS)-reported sales figure of 13.39 billion gallons. The red dashed line represents total estimated demand of 14.15 billion gallons: the LCFS-reported figure plus the volume displaced by PEVs. This combined total serves as the denominator for the 5.4% displacement figure cited above. Analysts who work from LCFS-reported volumes may find year-over-year changes more informative: on that basis, PEVs reduced gasoline consumption by approximately 160 million gallons in 2025 relative to 2024 (the difference between 760 million gallons in 2025 and 600 million gallons in 2024). This framework is the basis for the displacement estimates presented above. 

Figure 4. Gasoline Sales with and without PEV Gasoline ReductionsSource: Stillwater analysis