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Why permitting reform could break the political alliance that produced America’s most significant climate law

The U.S. climate coalition is under serious strain.
The tension has been brought to a head by last month’s debt-ceiling compromise, which enacted a variety of reforms to the National Environmental Policy Act and exempted the long-debated Mountain Valley Pipeline from federal environmental review. While environmental groups have decried the concessions as “a colossal error … that sacrifices the climate,” clean-energy trade groups are praising them “an important down payment on much-needed reforms.” This gulf now threatens to disintegrate the political alliance that, less than a year ago, won the Inflation Reduction Act (IRA), its most tangible accomplishment and by far the country’s most significant climate law.
The differences over permitting reform aren’t just a disagreement about tactics. Rather, they reflect fundamental changes within three of the most important factions within the climate coalition — the environmental movement, the clean energy industry, and the Washington-centric group I’ve termed the green growthers. Facing these changes and their implications is critical to preserving the political foundations of federal climate action.
Ever since passage of the IRA unlocked massive fiscal resources for decarbonization, the climate coalition has been split on how best to put that money to work. While nearly everyone recognizes the need to substantially increase the pace at which clean energy infrastructure gets deployed, division centers on the question of permitting reform. To even name the debate is to invoke a factional diagnosis: the view that environmental laws are hobbling decarbonization by preventing clean energy infrastructure from getting built quickly enough — or even at all. This perspective has rapidly gained momentum across a bipartisan community that includes self-styled centrists within the climate coalition.
Permitting reform is unraveling the climate coalition because it reawakens a fundamental, unresolved disagreement over how to decarbonize. Its timing adds to these tensions: bipartisan legislation to curtail national environmental law has arrived, not accidentally, just as the clean energy industry has become most capable of splitting from the broader climate coalition that helped create it.
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The oldest faction in today’s climate coalition, and the most diffuse, is the environmental movement. Its mainstream wing has roots in the principles of preservation, and its largest organizations have spent multiple generations fighting for clean air and water, and ecologically healthy lands and species.
Its environmental justice wing, by contrast, emerged as racial justice activists combined civil-rights and environmental-protection principles to address historically unequal pollution burdens that have concentrated health risks and environmental damages in disempowered communities of color. Only in the last few years, after decades of discoordination, disinterest, and exclusion, have preservationist institutions become more attentive to the legacy of environmental racism. The movement has now coalesced, however incompletely, around a broader and more inclusive environmental vision.
Though preservationist and environmental-justice approaches can still lead to different priorities, the new environmental movement is at its most unified when it opposes fossil fuel production. The movement’s history of civil disobedience and legal combat have taught it to keep fossil fuels in its crosshairs — not only because of the social and environmental harm fossil fuel projects cause, but also because fights against fossil fuels mobilize the public, clarify the stakes, and yield tangible improvements for local communities and environments.
Though both wings of the environmental movement fought hard for the IRA, the law does almost nothing to directly constrain fossil fuel production. Instead, the IRA largely aims to reduce greenhouse gas emissions not by preventing those emissions, but rather by boosting the production and use of low-carbon energy — along with generous subsidies for storing carbon dioxide, often in conjunction with oil production or fossil fuel combustion. Accordingly, the environmental movement has redoubled its efforts to pair the law’s clean energy subsidies with new fossil fuel restrictions.
The environmental movement’s discomfort with a subsidies-only approach to decarbonization is probably better known than the shifting politics of the clean energy industry. As the new environmental movement has coalesced, clean energy has matured into a fully-fledged industry, both in the U.S. and around the world. Until the past few years, the nascent clean energy industry wielded little political muscle, depending instead on the political support and lobbying assistance of environmental groups. Not that long ago, renewable energy was more expensive, less familiar to regulators, and supported by fewer subsidies than fossil energy systems. As a result, clean energy companies depended heavily on the environmental movement’s political support to survive and grow.
Over the past half a decade, technological progress and policy victories achieved in coalition with the environmental movement have vaulted key technologies like wind, solar, and batteries into commercial maturity. Those gains are now locked in. The IRA provides at least 10 years of new federal clean energy tax credits, ending the boom-and-bust cycle of short-term extensions that held the clean energy industry together for most of the previous two decades. With falling costs and fiscal tailwinds, the clean energy industry no longer relies on the environmental movement’s lobbying muscle for commercial success.
The clean energy industry’s maturation has led to more profound differences with the environmental movement that eclipse a simple re-alignment in relative power. As the clean energy industry has grown, it has come to share the fossil energy industry’s preference for more permissive regulatory regimes and fewer environmental protections. In the pre-commercial era, climate-conscious jurisdictions like California drove clean energy development through supportive environmental policy. In recent years, though, the clean energy industry has grown faster and profited more in places like Texas, and for the same reason the fossil fuel industry has: because Texas offers open markets and few restrictions on energy development. As the clean energy industry’s policy priorities have shifted, its growing lobbying apparatus has followed suit, leading groups like the American Clean Power Association to collaborate with fossil fuel companies in pursuit of environmental deregulation.
Activists and policymakers focused on rapid, massive clean energy development make up a third critical faction of the national climate movement. Many in this group work in and around the Biden administration and have come to the climate fight not from the environmental movement, but from other areas such as industrial policy, national defense, some strands of organized labor, and electoral politics. They have brought their prior priorities — job creation, domestic manufacturing, and stable energy prices — to their climate politics. In the wake of the IRA, they remain focused on lowering the remaining barriers to rapid clean energy development.
These often center-left climate actors have only cohered into a distinct faction in the past five years, as enthusiasm for so-called “supply-side progressivism” has given them a common language with which to articulate a set of climate solutions founded on proactive government support for private reindustrialization. For some green growthers, deregulation is a necessary precondition to decarbonization, and since many also believe that clean energy will — with the IRA’s help — outcompete fossil fuels, they see fewer risks to reforming environmental law than the environmental movement does.
In part, the conflict over permitting reform has grown bitter because the term gets used to refer to many different policy proposals. Depending on the speaker and the audience, it can mean sweeping changes to how environmental laws govern new infrastructure projects; tailored tweaks to environmental review; more resources to strengthen administrative capacity and expedite permitting reviews; or changes to the process for building transmission lines and connecting power plants to the grid. This tangle of meanings has undermined the climate coalition’s ability to negotiate its internal differences and prioritize consensus solutions to the challenge of rapid clean-energy development.
More fundamentally, though, the environmental movement, the clean energy industry, and the green growthers are clashing over permitting reform because it has forced them to confront their ongoing disagreement about how to achieve decarbonization.
To many in the environmental movement, and especially on the climate left, most permitting reform proposals double down on what they see as a worrying tenet of the IRA: its dependence on competition and market dynamics to slash fossil fuel production. The environmental movement is familiar from long experience with this kind of market thinking, which promises that present development and the damage it entails will eventually unlock future benefits. As the environmental movement as a whole has become more concerned with historical pollution burdens, that bargain looks worse, and less trustworthy, than ever.
Many permitting reform proposals, including the newly-enacted language of the debt-ceiling deal, exacerbate these concerns by targeting the environmental movement’s oldest and most effective legal tools for defeating fossil fuel projects. At the same time, these proposals still omit any of the constraints on fossil fuels that the environmental movement believes necessary for decarbonization.
The environmental movement has responded with deployment-focused proposals of its own that aim to speed clean energy development without weakening environmental law. However, even the most straightforward of these proposals — such as appointing a fifth commissioner to the Federal Energy Regulatory Commission — have repeatedly been deprioritized by clean-energy groups and green growthers. In the wake of the debt ceiling deal, which included none of the environmental movement’s reform priorities but substantially weakened environmental review, the movement is mobilized and angry.
To the green growthers, by contrast, rapid decarbonization cannot happen without permitting reform. According to the IRA’s market-decarbonization logic, the best and most politically plausible way to drive fossil fuels out of American energy markets is to displace them with cheaper and more abundant clean energy. At the same time, events such as the gas-price shock of 2021 — and its damage to Biden’s popularity — has reinforced their existing belief that suppressing fossil fuel extraction without first creating massive new clean energy production will risk serious political backlash. This theory of change has led green growthers to be simultaneously sympathetic to the clean energy industry’s deregulatory wishlist, and skeptical of the environmental movement’s focus on constraining fossil fuel production.
These factions’ divergent theories of decarbonization have offered a wedge to those within the climate coalition who believe rapid, effective clean energy development has become incompatible with rigorous environmental and social protections. Anti-coalitional voices, especially within portions of the clean energy industry, increasingly see permitting reform as an opportunity to split the climate coalition, excising the environmental movement from the climate coalition and creating a new, climate-inflected industrial alliance.
Most green growthers understand that such a split would deprive the existing coalition of its popular wing at a critical moment, threatening the political viability of climate progress. Though the growthers believe that the IRA’s clean-energy manufacturing boom will build a powerful new political coalition in favor of decarbonization, that coalition does not yet exist.
Environmental protection, by contrast, is extremely popular across America today, and the environmental movement has repeatedly proven its ability to mobilize public support. Though the clean energy industry no longer needs the environmental movement’s political muscle to turn a profit, the climate coalition as a whole may struggle to maintain political support for decarbonization without it, especially as climate change destabilizes the country’s energy systems and the right continues to oppose rapid decarbonization.
To understand why, you don’t need to look farther than Texas, which is something of a proving ground for the three factions’ competing beliefs about how deregulation may shape decarbonization.
In recent years, Texas provided strong evidence for the clean energy industry’s assertions that, whatever the environmental and social costs, less regulation can speed the deployment of renewable energy. It likewise bolstered green growthers’ claims that cheap, plentiful renewables can displace fossil energy.
But suddenly, Texas is also proving the environmental movement’s counter-argument. The state’s legislature has just created a new set of generous rules and tax subsidies that support new gas-fired power plants while hampering clean energy development. Though state lawmakers are transparently motivated by gas-industry lobbying and culture-war fixations, they have justified the legislation by arguing that Texas’ increasingly unreliable grid needs more gas plants to keep the lights on.
Such claims, however dishonest, will only grow more plausible to many voters as climate-exacerbated disasters and the energy transition itself strain infrastructural systems in the years to come. Without permitting structures or robust state environmental laws, Texan climate activists are ill-equipped to fight a possible new wave of gas plants, and Texas’ future decarbonization is now in peril.
Whereas last year, Texas’ clean energy boom seemed likely to continue driving fossil fuels out of the market and emissions down, now Texas’ new IRA-style subsidies and weak environmental protections look more likely to leave the state with more energy production of all kinds. Though Texas will continue to add clean energy, its decarbonization remains in doubt.
Permitting reform is threatening the national climate coalition because it cuts to the heart of a longstanding philosophical disagreement about what it will take to actually achieve decarbonization. It has arrived as the climate coalition’s major factions are transforming in ways that themselves sharpen the conflict. Good-faith advocates of decarbonization in all camps should be concerned that, in the wake of the debt-ceiling deal, a new round of fractious permitting-reform fights will split the climate coalition into separate camps with irreconcilable theories of climate action.
The result, though ideologically purifying, would be politically disastrous.
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The EV maker appears to be poised to start construction on its second factory.
Rivian’s stock fell 18% on Monday, but it’s hard to imagine the company’s executives are too upset. Why? Because the automaker seems to be on the verge of starting work on its long-awaited second factory, 45 miles east of downtown Atlanta.
Let’s do some reading between the lines. Rivian has had a great few weeks. The EV maker announced last week that it is on track to sell about 3,000 more cars this year than expected, and its stock has been on a tear, rising more than 37% from close on June 25 to close on Monday.
The company’s CEO, RJ Scaringe, evidently decided it was time to capitalize on the run-up. The company announced on Monday evening that it would offer another 75 million shares of its stock this week, diluting existing investors. That raise would be used to fund “general corporate purposes,” according to a federal filing, including “the funding of certain equity contributions” related to an Energy Department loan.
Back in April, the company came to new terms with the Department of Energy’s in-house bank over a nearly $6.6 billion loan to build its new Georgia factory, which is supposed to manufacture the company’s new line of cheaper R2 SUV and R3 crossovers. That federal loan — initially negotiated in the Biden administration’s final days — was downsized to $4.5 billion under the new Trump-era terms, but also rewritten to let the automaker draw more money from the deal faster. (Rivian is already making the R2 at its existing factory in Normal, Illinois, but the Georgia factory should have about 40% more capacity than that plant.)
As part of any Energy Department loan — as in any project finance transaction — borrowers have to hold a certain amount of cash in escrow and reserve accounts to secure against a deal failing. Now Rivian can fund that money without tapping its cash on hand further. The new share offering is supposed to price this evening, suggesting that despite today’s slide, the company could raise more than $1 billion from the sale. Rivian’s stock is now trading roughly where it stood a month ago.
The upshot of all of this: With the loan secured, serious building efforts could finally start soon on the automaker’s second factory. (The automaker technically broke ground in September, but has yet to begin meaningful construction.)
“We’re setting up to go vertical in the second half of this year (a.k.a. steel sticking out of the ground) but we have said previously that we expect to draw on the loan for the first time by early 2027,” Peebles Squire, a Rivian spokesman, told me in an email. “Factory timeline is production of vehicles to begin in late 2028.”
(Energy Department loans work on a reimbursement basis, so the automaker will need to begin spending on the factory before it can claim the money.)
Though Rivian is among the most successful of the U.S. electric vehicle startups, it wasn’t completely clear after President Trump took office whether the automaker would survive its trek through the valley of death. It’s still not certain, of course. But positive reviews for the R2, a $6 billion deal with Volkswagen, and its significant Sun Belt factory nearing construction all augur well for the country’s most famous EV startup not run by Elon Musk.
“It’s got nothing to do with technology. It’s nothing to do with execution capability. It’s purely due to access to capital.”
Ever since Trump reentered the White House, Europe has been a safe haven for U.S. climate tech companies fleeing an increasingly hostile policy environment. Through strong carbon pricing and stable regulations, the bloc has created demand for still-experimental technologies such as green hydrogen, thermal energy storage, low-carbon building materials, and sustainable fuels.
And yet at the same time, Europe has struggled to finance many of its own climate tech startups as they enter the capital-intensive scale-up phase. What gives?
The problem is not a lack of startups or capital. European firms raised $61 billion for climate-focused funds last year, far outpacing those in the U.S., which brought in $37 billion, according to Sightline Climate. The problem is that almost all of that European money flows to infrastructure and private equity investors backing more mature technologies. Early-stage startups also enjoy relatively strong backing, but the market starves the growth-stage middle.
The issue is both cultural and structural: Most of the bloc’s investors are unaccustomed to making the high-risk, high-reward bets required to scale climate tech. They also often can’t access tools like loan and equity guarantees, which remain limited in Europe, nor are there the institutional limited partners and growth-stage co-investors that could help de-risk those investments.
“It’s got nothing to do with technology. It’s nothing to do with execution capability. It’s purely due to access to capital,” Craig Douglas, a founding partner at the Berlin-based multi-stage venture firm World Fund, told me. That means companies that have outgrown early-stage financing but are still considered too small or too risky for larger institutional investors often either shutter or seek capital abroad. Logically, if given the chance, most startups choose the latter.
“You’re allowing U.S. investors to cherry pick European assets,” Douglas told me. The result? “European technologies and European companies that are successful end up enriching American pension funds rather than European pension funds.”
Ioannis Ioannou, an associate professor of strategy and entrepreneurship at the London Business School, told me that the consequences extend beyond the purely financial, emphasizing that Europe runs a strategic risk by relying on foreign capital for its climate tech scale-up. “It means you lose the supply chains. You lose the skills. You lose the fine manufacturing capabilities. You lose the so-called green jobs.”
Douglas and the other specialists in European climate finance I spoke with emphasized that the ever-ominous “missing middle” funding gap is particularly pronounced in Europe. A report Douglas co-authored earlier this year, aptly titled “The Series B Funding Gap In European Climate Tech,” quantifies the problem. While 25% of U.S. climate tech companies that raised a seed round from 2010 to 2020 had moved on to secure a Series B by the first half of last year — regardless of what country the capital came from — only 15% of European companies were able to do the same. That has created a growing backlog of startups stuck in a financing limbo: The lineup of European companies looking to raise a Series B grew from 220 in 2020 to 533 in the first half of last year.
While smaller climate tech funds in Europe and the U.S. have raised similar amounts of funding for early-stage startups — $18.5 billion in Europe versus $20.2 billion in the U.S. from 2020 through the first half of 2025 — the gap at the larger end of the market is stark. The U.S closed 29 funds of at least $500 million or more, compared with just 11 in Europe. These larger funds are the ones capable of writing the $25 million to $100 million checks companies desperately need to commercialize and scale. As Douglas’ report notes, fewer than 20% of European climate funds are pursuing a growth strategy, with over 70% making early-stage investments only.
“When we raised World Fund One, we were the largest [debut] climate fund in Europe, and we’re a €300 million fund. That’s nuts,” Douglas told me. World Fund aims to help companies “reach growth-investor readiness” by supporting startups from their seed through Series B, a model Douglas would like to see replicated throughout the region. “We need another 20 World Funds out there in the market to start filling this capital shortfall,” he told me. The firm announced last February that it’s raising a second, €500 million fund, but that’s yet to close.
One of the primary reasons European growth-stage investors have less capital to deploy comes down to the structure of European financial markets, which remain heavily reliant on bank lending rather than higher-risk equity investments. As a result, institutional investors like pension funds, insurers, and endowments never built the habit of investing in venture capital, which shows up when comparing the LP bases across the two regions: In the U.S., about 72% of VC funding comes from private institutional investors, compared with just 30% in Europe. Public money, much of it from the European Investment Fund, helps bridge the gap, but it simply cannot match the scale of private institutions.
Pension funds are a telling case. They’re among the largest sources of venture capital in the U.S., allocating nearly 2% of their assets to VC. But in the EU, they allot just 0.018% — roughly 100 times less. And because the U.S. also has far more money sitting in pension funds than Europe does, this makes the gap in actual dollars reaching startups wider still. Without that deep pool of institutional funding, Europe struggles to support the $500 million- to $1 billion-plus funds that would have the wherewithal to lead growth-stage rounds.
The result is a self-reinforcing cycle. Large growth funds require large institutional backers, but precisely because European pension funds and other institutional investors haven’t stepped up, the venture market remains too small to absorb the kinds of $100 million-plus commitments pension investors managing billions of dollars typically want to make. “They don’t see [venture] as an asset class that they can invest in,” Douglas told me. “But the reason that it doesn’t exist is because they’re not investing themselves in that asset class.”
If there’s one thing I learned from my reporting, it’s that white these problems run deep, Europe is hardly standing still. Policymakers and investors are well aware of the disconnect and are now experimenting with strategies to close the scale-up gap and affirm the region’s position as a leader in climate innovation.
To attract more institutional investment, for example, a growing number of initiatives aim to create “funds of funds” and other government-backed structures that pool money from pension funds, insurers, banks, foundations, and other large investors. The fund-of-funds structure lets an institution make a single, large commitment; then, intermediary asset managers break that capital into smaller chunks and invest it across multiple venture funds. This gives large-ticket investors the scale and diversification they want without requiring them to conduct due diligence on dozens of small venture funds; venture managers, in turn, gain access to much larger pools of capital.
Germany’s Wachstumsfonds Deutschland, for example, is a €1 billion fund-of-funds backed by more than 20 investors — including insurers, pension funds, and large family offices — that invests across the German and broader European VC ecosystem, with a focus on growth-stage capital. The EU’s European Tech Champions Initiative follows a similar model. The European Investment Bank and six member-states launched the initiative in 2023 with €3.9 billion to back regional growth-stage VC funds. Now it’s raising a second tranche of money — targeting €15 billion — and is bringing in private institutional capital for the first time.
Europe’s member states have also pushed institutional investors toward coordinated capital commitments in recent years, with France’s Tibi initiative serving as the model. Launched in 2019, it tasks the French government with vetting venture and growth funds, with those that qualify becoming eligible for backing from initiative’s signatories, primarily insurers and some pension funds. The program has attracted about €31 billion in commitments to date. Germany adopted a similar approach with its WIN initiative, which has now secured €12 billion in pledges from more than 30 major corporations — including Deutsche Bank, BlackRock, and Henkel — to invest in the country’s venture ecosystem by 2030.
The Irish Venture Capital Association has proposed a similar model, while Tibi’s founder — the economist Philippe Tibi himself — has been on a tour essentially pitching the idea across the bloc. But Ioannou isn’t convinced that creating country-specific Tibi-style commitments is the most efficient way for the region to scale climate tech.
“I’m not sure that fragmentation will actually solve the problem,” he told me. “Maybe it will be better if all that capital came into one larger fund, whereby the scale-ups wouldn’t have to deal with country level fragmentation, regulations, jurisdictions, legal, and all that kind of stuff.”
That’s the idea behind the new €5 billion pan-EU Scaleup Europe Fund, which is designed to invest directly in European deep-tech startups — climate tech very much included — rather than through venture funds. Announced last year, the fund has already secured roughly €2.5 billion in capital commitments from both the European Commission and private institutional investors, with a second fundraising round planned for the second half of this year. EQT, Europe’s largest private-markets investor, will manage the funds, ultimately deciding which growth-stage companies to back.
“Everything happened so quickly, from agreeing to it to executing on it to allocating it,” Douglas told me. “In effect, it happened in less than a year, which in the European context is crazy.”
The idea is to replicate what the combination of U.S. federal support and deep private capital markets has accomplished, Dimitri Colin, a policy officer at the cleantech policy and advocacy group Cleantech for Europe, told me. “The whole idea is to bring what worked in the U.S. into European public financing policies,” he said. Colin extolled the virtues of the Biden-era Loan Programs Office, as well as the efficacy of other Inflation Reduction Act-fueled efforts such as generous production tax credits when it comes to derisking investment in first-of-a-kind tech.
In our interview as well as in a recent report, Colin argued that EU funding should move from prioritizing grants to loan and equity guarantees in its forthcoming budget for the years 2028 through 2034. That’s because guarantees have proven far more effective than government grants at bringing private investors into climate tech, Colin told me. According to his report, every euro of grants or equity capital channeled through the VC arm of the European Innovation Council yields about €3 in additional investment. That’s nothing to scoff at, but it pales in comparison with InvestEU, the bloc’s €26.2 billion investment guarantee program. Every euro of guarantees from the latter attracts nearly €14.80 in private follow-on capital.
“The main idea behind the whole budget should be to focus on the leverage effect,” Colin told me, referring to how much additional private funding government backing generates. “How can the little public money that we have in Europe — because the fiscal environment is, of course, very constrained — more easily mobilize private money? That’s what the LPO did well.”
Colin also wants to change the EU’s public funding rules to make it easier to subsidize ongoing operational expenses for early-stage cleantech facilities, similar in effect to U.S. production tax credits. Currently, European policymakers often structure public support for these projects as capex grants paid out after construction is complete. This type of support is more difficult for private investors to underwrite since it doesn’t directly improve the plant’s ongoing operating economics, one of the risks investors care about most.
Getting these financing structures right is a matter of life or death for many of Europe’s most promising climate tech industries. Douglas points to batteries, critical minerals, semiconductors, and green molecules as sectors with the technological readiness to scale domestically — but not yet the capital. “One of the major risks in every sector we know is who’s going to be there, who’s going to be able to go with us on that journey to make sure the company has the capital to be successful,” he told me. Still, he sees reason for optimism. Because if there’s one thing that can be said about the E.U. at this moment, it’s that “they’re definitely taking it seriously.”
“The perfect solution doesn’t exist,” Colin told me. “We need to align the funding models, we need public de-risking tools, but we need also a true industrial strategy, China has done that, the US has done that with the IRA,” he explained. Now it’s Europe’s turn.
Not going to lie, I didn’t see this coming.
Tesla just finished its strongest showing in years. In the second quarter of 2026, the company sold about 480,000 vehicles around the world — well over stock market projections of about 400,000 EVs. Tesla’s sales mark a full 25% year-over-year increase from the second quarter of last year.
If you’re surprised by this news, you’re not alone. Sales of Elon Musk’s EVs had been trending downward over the past few years following a series of self-inflicted wounds. The Cybertruck was a bomb. Tesla appeared to be interested only in building the self-driving cars and autonomous robots of the future, not the electric vehicles of today. Musk’s associations with President Trump and off-putting online politics alienated potential customers everywhere.
Yet here we are. So what happened?
European gas prices, for one thing. Tesla sales actually continued to fall in the U.S., where the electric car market as a whole still hasn’t recovered from tariffs confusion, the loss of federal subsidies, and other chaotic conditions over the past year. Tesla’s rally came instead from China and, interestingly, Europe: Registrations rose 39% in Denmark, 56% in Sweden, and 43% in Portugal and Italy.
It wasn’t so long ago that Musk’s politics had reportedly cratered interest in his cars in those countries. But European gas prices, which are typically much higher than those in the U.S., have also soared because of oil shocks related to the Iran War. EV interest, then, is up — so high that lots of buyers are willing to look past the personality of Tesla’s chief. (It doesn’t hurt that Tesla introduced less-expensive versions of both Model 3 and Model Y, with remarkably cheap leases and loans, to Europe this year to help overcome its struggles there.)
In China, meanwhile, Tesla has had something else up its sleeve to buoy sales. We’ve repeatedly noted the contraction of the company’s EV lineup: With the failure of the Cybertruck as well as the outright cancellation of the older and slow-selling Model S and Model X — the electric cars that pushed Tesla into the mainstream in the 2010s — the brand gets nearly all of its sales (more than 97% in Q2) from just two cars, the Model 3 sedan and Model Y crossover. And there are no signs it has an all-new mass-market car coming soon.
Instead, Tesla cobbled one together by making a new version of an existing car. In China, Musk has been selling the Model Y L, a version of his crossover with its platform stretched out by 6 inches to cram in an extra row of seats. (Tesla has offered a seven-seat version of its ordinary Model Y, but the two little seats in the back had just 25 inches of legroom compared to the 31 inches in this new version.) As a three-row SUV, the longer Model Y lets Tesla compete in a space that it vacated when it killed off the giant, expensive, gullwing-doored Model X. And as of last week, Model Y L is available in the U.S. Tesla hopes the vehicle can lead to a reversal of its sinking fortunes here, where its EV sales shrank by 20% in the second quarter.
Truthfully, the car is a bit of a kluge. Rear seats often require a compromise on comfort and space. In the case of the Model Y L, Jalopnik notes that even with the 6 inches added to the wheelbase, Tesla’s signature sloping roof doesn’t leave much headroom for the occupants of the way-back. Boxier EVs that were built to be three rows to begin with, like the Hyundai Ioniq 9, Kia EV9, and Rivian R1S, are more pleasant for the fifth and sixth passengers. Nevertheless, those who wanted a bigger Tesla at a starting price of around $60,000 can now get one, and that counts.
Model Y L is also a testament to the power of the platform. Yes, building a new vehicle from the ground up would have provided Tesla with a better all-around vehicle than what it got by hacking the Model Y. But the modified Model Y was much faster and cheaper to deliver, providing an entry into a popular segment of the car market just at the moment Tesla needed to right the ship.
Doing more with less, like creating a three-row EV on the platform of your two-row car, looks primed to become a big part of the future of electric vehicles. That’s particularly true when it comes to growing adoption in America, where legacy automakers and startups alike are trying to simplify manufacturing to bring down costs. The solution to get to market for a company like Honda was simply to borrow General Motors’ EV platform and build its first EV on top of it. Rivian has said it has no plans to sell a pickup truck on its new R2 platform the way it has with its original vehicle, but it absolutely could — and arguably should — if market conditions suddenly made such an EV pickup a hot item.