Opposing Camps Square Off on California Electric Car Mandate
To an electric vehicle advocate, the worst epithet to hurl at a new EV is to call it a “compliance car.” The term is used to denote a plug-in electric car that is made only to comply with California’s zero emissions mandate (or other regulations)—rather than being produced out of a firm conviction that electric cars will be robust profitable automotive products. EV fans believe that automakers are misguided in not enthusiastically supporting the early electric car market with large production numbers.
But the Wall Street Journal, in a live web interview on Nov. 23 with its reporter Mike Ramsey, expressed the opposite view: that it’s the state of California that is misguided in forcing an EV mandate destined to fail because there’s no demand. “Electric cars. The government wants it. The people don’t,” states the host of WSJ Live.
Ramsey concedes that there is a small market for EVs, and that “California would probably attract a number of people to electric vehicles even if the [state] weren’t demanding it.” But he says electric cars are not popular because the vehicles are “very expensive, have limited range, and take a long time to recharge.” The price of the Nissan LEAF, the most popular all-electric car, starts at $35,200. The effective price drops to about $25,000, after a $7,500 tax credit and a $2,500 rebate in California.
Of the dozen or so plug-in cars currently on the market, most are being produced in low quantities that closely align with what California requires—a couple of thousand over a two to three period. Honda only committed to leasing 1,100 Honda Fit EVs—or about 366 cars a year—over the next three years. Toyota will produce only 2,600 units of the RAV4 EV during the same time period, selling them only in California. The Chevy Spark EV and Fiat 500e are also characterized as compliance cars, due to low production and sales mostly or exclusively in California.
The exact number of zero emission vehicles required for each automaker involves a complex calculation, and credits can be bought and sold between manufacturers. The basic rule states that each automaker will have to sell a minimum of approximately 263 fully electric or fuel cell vehicles per 100,000 total car sales to meet the requirement.
A Flood Or a Trickle?
Nissan stands out as the most committed player in the EV market. But Ramsey said it will be “almost impossible” for Nissan to be a success, because ZEV requirements are “flooding” the electric niche market.
Presumably, electric car advocates believe that auto companies should go well beyond the minimum requirement—because it’s not only good for environment and for jobs, but because there is a large untapped market that would purchase plug-in cars only if they were available on the market in sufficient numbers and variety. The advocates would hardly describe a couple of thousand plug-in cars per year as a flood.
Ramsey pointed to dealership discounts offered on the Nissan LEAF and Chevy Volt as evidence that prices will have to significantly come down to make the EV market viable. He believes the lower prices are “good for consumer, but not so good for the carmakers.” Ramsey reported that Toyota officials, speaking on background only, told him that the company is losing money on the Prius Plug-in Hybrid because it lowered its price to compete with the Chevy Volt.
Ramsey cast doubt on California’s larger environmental goal with the program. “California wants to get its air quality back to what it was pre-1990 by 2025,” he said. “To do that, they calculated that they have to have a certain number of zero emissions vehicles on the road. Unfortunately, I don’t see how it’s going to be possible when you’re only selling a couple thousand vehicles a year now.” By the end of the year, there will be approximately 50,000 plug-in cars sold in the United States in 2012—with California (and other states that follow the state’s emissions regulations) representing the lion’s share of those sales.
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