Automakers are quietly wary of California's emissions mandate
Photo credit: JOE WILSSENS
LOS ANGELES -- They rarely say so in public, but automakers are worried about California's law requiring that zero-emission vehicles account for 15 percent of sales in the state by the 2025 model year.
California air quality regulators say the ZEV mandate will put 1.4 million plug-in hybrids, hydrogen fuel cell vehicles and electric vehicles on the road in California by 2025, including 271,000 in that year alone.
Automakers are preparing to comply with the law and automaker executives have voiced support for cutting carbon dioxide emissions.
But privately, automakers bristle at the high cost of compliance and at the prospect of the law forcing onto the market large numbers of vehicles that consumers do not want to buy.
A waiver granted Dec. 27 by the EPA allowed California to put the law into effect immediately, although most of the changes kick in beginning in the 2018 model year. The California Air Resources Board says the EPA's waiver also paves the way for other states to adopt the law.
Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont, which adhere to California emission rules, are expected to adopt the updated ZEV mandate. The states plus California collectively represented about 27 percent of U.S. light-vehicle registrations in the first 10 months of 2012, according to the most recent data available from Polk.
If the 2025 model year ZEV sales requirements were in place, in a 14.5 million unit U.S. light-vehicle market, automakers would have to sell roughly 600,000 plug-in hybrid, hydrogen fuel cell or EVs to comply with the law.
That's a far cry from current electric-drive vehicle sales. According to the Electric Drive Transportation Association, 44,888 plug-in hybrids and EVs were sold in the United States in the first 11 months of 2012. That's nearly three times the plug-in vehicle sales from the same period of 2011 -- but just a third of one percent of the total U.S. light-vehicle market.
"There's this prevailing thought that if we legislate, the automakers will find a solution," said an automaker product planning executive who did not want his company identified as being critical of the ZEV mandate. "The thing that they always fall back on is that necessity is the mother of invention."
The Alliance of Automobile Manufacturers, a lobbying group whose 12 members include General Motors, Ford Motor Co. and Toyota Motor North America Inc., has begun to mount opposition to the mandate. At a hearing in October, the alliance urged the EPA to block California's request for a waiver to implement the mandate.
"We believe that the ZEV mandate sets forth unattainable standards in California and the other states that follow California, especially given the status for current electric vehicle charging infrastructure, hydrogen refueling stations and the level of consumer demand," said Gloria Bergquist, a spokeswoman for the alliance. "Our concern is that if consumers don't buy them, we're going to have many vehicles left on dealers' lots."
David Clegern, a spokesman for the California Air Resources Board, says that the board's ZEV targets for the 2018 model year and after were crafted in consultation with the auto industry.
"The industry folks were right there at the table," Clegern said. "These numbers were based on, for the most part, what they think they can sell."
Clegern noted the ZEV mandate has a midterm review scheduled to gauge market demand for zero-emission vehicles, meaning that the sales requirements may be adjusted.
"Beyond that, these things are being reviewed constantly," Clegern said. "These things are living documents -- they are written as law but not written in stone."
The review may give little solace to auto industry product planners and financial execs who have to deal with long product planning cycles and must make big investments early to get technologies to market.
A second automaker executive, who also did not want to be named, said the cost of his company's EV program, undertaken mainly to comply with the ZEV mandate, could have funded development of three or four all-new vehicles powered by conventional engines.
Automakers are launching vehicles that will comply with the mandate, such as the Nissan Leaf, Ford Focus EV and Mitsubishi i-MiEV on sale now, and the Fiat 500e and Chevrolet Spark EV that debuted at the Los Angeles Auto Show.
Toyota launched its RAV4 EV in September in California. The company said it expects to sell 2,600 units over the next three years, which, according to a Toyota insider, is what the automaker needs to comply with the current ZEV mandate for that period.
ZEV sales volume requirements begin to ramp up significantly in the 2018 model year.
In that model year, 4 percent of most large automakers' sales in California must be zero-emission, gradually increasing to 22 percent in the 2025 model year. The large automakers' ZEV sales must reach 22 percent of their volume because even though the state's goal is 15 percent, smaller automakers are not required to sell zero-emission vehicles.
Sales of plug-in hybrids, which are less expensive for consumers and have gasoline backup engines, can be counted, but can only be used to comply with up to 2.5 percentage points of the 4 percent sales requirement.
That gap grows annually until the 2025 model year, when just 6 percentage points of an automaker's 22 percent required ZEV mix can be fulfilled by plug-in hybrids. The remaining 16 percent must be hydrogen fuel cell vehicles or EVs.
Bienenfeld: No flexibility
Robert Bienenfeld, American Honda's senior manager for environment and energy strategy, says that although Honda supports reducing carbon dioxide emissions, California's law should be more flexible.
"The goal certainly is admirable, but the regulation itself is a bit of a straitjacket," Bienenfeld said. "There is not the flexibility for a company like General Motors to meet all of their requirements with the Volt, even though that might go a long way to increasing electric miles traveled and making the most efficient use of expensive batteries."
The ZEV mandate is part of California's goal to slash carbon dioxide emissions by 2050 to half of 1990 levels. Bienenfeld says the ZEV sales targets mandated by the state are "the result of working backwards from a goal."
"If it takes 10 years to turn over the fleet, then all those clean cars must be 100 percent of new cars by 2040. If you look at technology adoption rates, you have to start now. That's the argument," he said. "The reason I said it's a straitjacket is because the timelines are dictated and driven as much by the end goal as they are by technology readiness."
Bergquist says the fact that vehicles such as the RAV4 EV and the Leaf are on sale makes the current ZEV mandate different from the law's original incarnation in 1990, when it was conceived as a measure to force automakers to develop new technologies.
"We're at a point where automakers have put billions into these technologies, and if they put them on sale, they would love to sell these vehicles and sell them in high volumes. Hopefully that will happen," Bergquist said. "What California is doing is raising the bar, saying you must sell these many vehicles, and we're not in the driver's seat. Consumers are."
You can reach Ryan Beene at email@example.com. -- Follow Ryan on