“Chrysler Group LLC next week plans to unveil an unusual automobile—an electric car that doesn’t stand a chance soon of turning a profit and is unlikely to draw many customers. So why is the company making it? It has to. California requires it. For more than two decades, California has enacted rules aimed at improving the state’s famously smoggy air and staving off global warming, which is seen as a long-term threat to the Golden State’s lengthy, prized coast line. The rules have required auto makers for more than a decade to sell some vehicles that produce little to no tailpipe exhaust, such as electric or hydrogen fuel-cell cars. All major auto makers have either begun selling electric vehicles or plan to by the end of next year.”
We should all strive to follow in California’s footsteps. Read the entire WSJ article below:
California’s rules become more stringent this year. In the past, car makers could get credits for selling lots of high-mileage cars like hybrids without selling any electric vehicles. But those credits are phasing out and most auto makers can no longer avoid selling electric cars—even if few consumers are rushing to buy them.
The California law’s impact on auto makers will be on display late next week at the Los Angeles Auto Show, where Chrysler will unveil its first battery-powered car—a Fiat 500e subcompact supplied by majority owner Fiat SpA—that it will start selling in the state next year. Chrysler Chief Executive Sergio Marchionne has estimated Chrysler will lose between $8,000 and $9,000 on each 500e it sells; pricing hasn’t been disclosed.
GM will unveil its battery-powered Spark subcompact, its third such vehicle. Nissan Motor Co., 7201.TO +2.87% Ford Motor Co.,F +0.65% Toyota Motor Corp.7203.TO +2.33% and Honda Motor Co.7267.TO +3.50% also are selling electric cars in the U.S., in part, to fulfill the California requirements. California “can make us sell a minimum amount of cars, but unfortunately, they can’t make people buy them, or even get our own dealers to order them from us,” said Kevin Kinnaw, Toyota’s U.S. manager of regulatory affairs.
The Golden State’s zero-emission requirement has a lot of clout because California is a big car market—it accounts for about 10% of all U.S. auto sales—and because 10 other states, including New York, New Jersey and Maryland, have followed its lead and enacted the same regulations. Auto makers that don’t meet the minimum sales requirement could be barred from selling vehicles in the state.
The Obama administration also is rewarding auto makers for offering more electric cars under fuel-efficiency rules approved this year. By 2025, car makers’ vehicle fleets must average 54.5 miles on a gallon of gasoline, a goal that can be achieved in part by offering more electric cars. The European Union has similar requirements for sharply reducing carbon-dioxide emissions through improved fuel efficiency. And China wants electric cars to make up an increasing portion of the millions of new cars that appear on its roads each year.
The number of zero-emission cars that must be sold under the California rules is determined by a complicated formula and can vary, depending on whether an auto maker gets credits for hybrids, electric cars or other high-mileage vehicles sold in the past. Generally, a car maker that sells 100,000 vehicles a year in California would have to sell at least 1,000 battery-powered electric cars with a 100-mile range a year starting in 2015.
By 2025, California envisions that 1.4 million cars on the road in the state, or one in seven vehicles, will run on electricity or hydrogen. So far this year, only about 26,000 electric vehicles have been sold in the entire U.S., a tiny fraction of the 11.9 million cars and light trucks Americans have purchased. About one in four electric vehicles sold are in California.
Analisa Bevan, who runs CARB’s zero-emissions vehicle program, said the state is committed to its pollution-reducing targets and won’t let up. If car companies failed to meet the targets, the state would look to motivate sales in other ways, by adding incentives or installing more infrastructure, before backing off on the requirements. Auto makers which miss the sales targets may be fined, or could face restrictions on what cars they can sell in the state.
The increasing sales targets present the biggest challenge for Toyota, which last year sold 240,000 vehicles in California. By 2015, the company would be required to sell Californians about 2,100 electric cars with a 100-mile range, based on its 2011 sales in the state. In addition, Toyota will have to sell an even higher number of plug-in vehicles, cars that have both a gas engine and a battery-powered motor that can be recharged via an electrical outlet. A Toyota official said the company is losing money on its plug-in models. He declined to say how large its losses are.
Toyota currently offers a Prius plug-in hybrid in California, an electric Scion iQ EV minicar that it is selling to car-sharing fleets, and an electric RAV4 compact SUV that became available in September in low volume. Toyota also plans to sell a hydrogen-fuel car in 2015.
Even with all these vehicles, Toyota may struggle to hit the targets, particularly outside of California where its customers are more likely to be driving Toyota SUVs than Prius hybrids, said Toyota’s Mr. Kinnaw. “All of us have to figure out a way to comply in these states or we are out of business,” he added.
Robert Bienenfeld, an environment and energy strategy manager at Honda, said the rules present a “unique challenge” because they basically set a hard timeline for a technology that is difficult to predict. What’s more, electric cars don’t yet make economical sense. They have limited range and long recharging times, Mr. Bienenfeld said. “We are asking individual consumers to shoulder those costs” for society, he added. To meet the requirements, Honda is employing a range of strategies to ensure compliance.
Chrysler, which doesn’t currently sell any hybrids or plug-in cars, has gotten by until now because it got credits for past sales of golf cart-sized electric car sold under former subsidiary, General Electric Motorcars LLC.
Auto makers can also buy credits from other manufacturers selling electric cars. Honda, for instance, has purchased so-called ZEV credits from Tesla Motors Inc.,TSLA -1.61% a California startup that makes high-end, electric sports cars but at such low volumes it isn’t now affected by California’s rules.
By Mike Ramsey and Christina Rogers for the Wall Street Journal.