California Under Pressure, Modifies 1998 ZEV Mandate

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In 1996, The California Air Resources Board (CARB) voted to give automakers a reprieve from implementation of the Zero Emission Vehicle (ZEV) mandate. If implemented on schedule in 1998, 5 percent of all cars offered for sale in the state by the seven largest automakers would have to emit zero tailpipe emissions. This represented the first time the regulatory agency had backed down in three decades of leading-edge emissions mitigation programs. Instead, a Memoranda of Agreement with Chrysler, Ford, GM, Honda, Mazda, Nissan, and Toyota required placing up to 3,750 advanced EVs on the road beginning in 1998 and working toward commercializing advanced batteries and other ZEV technologies. This report is reprinted just as it ran in 1996 to lend a sense of unfolding activities at the time

CALIFORNIA MODIFIES ELECTRIC CAR MANDATE
ORIGINALLY PUBLISHED APRIL 1996 That there's a keen desire on the part of automakers and oil companies to obviate California's 1998 zero emissions vehicle (ZEV) mandate is no surprise. Indeed, it's no revelation that auto and oil interests have now enthusiastically embraced the California Air Resources Board's late-March ruling that the sale of ZEVs by automakers will not be required in the state until the year 2003.

Talk of fueling even a small niche vehicle market with electricity is enough to peg any oil company's threat meter. And ordering automakers to produce and sell EVs to an uncertain market goes against the grain. More than others, automakers understand the challenge of introducing an all-new product destined to compete against conventional vehicles that have enjoyed great success and a worldwide cumulative build of nearly a billion units over the past 100 years.

As Ford's electric vehicle program director John Wallace has previously pointed out: "We've got to compete against that vehicle in cost, and we're not going to be able to do it coming right out of the chute." Further, Wallace has underscored that all technologies, when they go through their life cycles, enter the mass market at a cost disadvantage. "It doesn't make any difference whether it's integrated circuits, computers, or electric vehicles. They all have that problem, and they need to go down a learning curve in order to achieve their final cost potential." According to Wallace, "that takes units... but it also takes time. Even if we leaped into huge volumes, it wouldn't help us get down the cost until we had some time to actually attack the cost issues and engineer our way around them."

So now what do automakers want? Apparently, time to get their R&D house in order, and CARB has certainly accommodated this with its modified ZEV rule. With the Board's recent vote, automakers have been given a reprieve from selling ZEVs until 2003, when 10 percent of all the cars they offer for sale in the state must emit zero tailpipe emissions. Unless events unfold differently than expected, this will still mean electric vehicles.

Green Car editors should point out that background discussions with executives working in various automakers' EV development programs underscore they are feeling a huge relief. Time and again, Green Car was told that there is a very real intent to develop and sell electric vehicles on the part of automakers. But they need more time to get it right, and the EV's mass-market introduction must be market-driven.

This is both good news and bad news. The efforts being made by auto manufacturers to develop viable EVs appear very real and some pretty exciting products are in the works. On the other hand, the "market-driven" buzzword being espoused within the auto community should send red flags up everywhere.

Making a business case for electric vehicles requires long-term thinking with substantial short- and mid-term investment. If a business case means conventional product development thinking combined with short-term profit, then an EV program will not make the cut in the boardroom.

To be successful, such a program has to be implemented with a longer view, perhaps incorporating non-traditional materials and production methods, with an eye toward the tangible value such a program will bring to an automaker's overall manufacturing and marketing efforts. This may well mean "world car" EV programs where ground-up electric vehicles are designed for both lucrative offshore as well as domestic markets.

The real value of California's ZEV mandate is that it not only kept the heat up on automakers to develop EV technology at a pace that wouldn't have been realized otherwise, but it also provided focus. If CARB did not back down, electric vehicles would be sold in significant quantity in 1998. Those companies investing heavily in EV component and subsystem development counted on it.

But the regulatory agency did back down for the first time in three decades of leading-edge emissions mitigation programs, and now we'll see limited numbers – some say nothing more than what amounts to a demonstration fleet – of EVs on the street in this time frame. It remains to be seen what will happen during the next seven years considering the turmoil just the past few years have brought to this field.

In the interim, CARB has announced it will augment its 10 percent 2003 ZEV requirement by signing a Memoranda of Agreement (MOA) with Chrysler, Ford, GM, Honda, Mazda, Nissan, and Toyota which requires these automakers to establish a Technology Partnership. The Partnership will place up to 3,750 advanced EVs on the road beginning in 1998 and work to commercialize advanced batteries and other ZEV technologies. Automakers are also required to build a cleaner car for the national market beginning in 2001, three years ahead of federal requirements.

Is CARB exceeding its authority by entering into these legally binding electric vehicle contracts with the automobile manufacturers? That's the question being raised by the California Department of Insurance and the Assembly Banking and Finance Committee. The MOA states that the Air Board will "work with the California Department of Insurance to establish reasonable rates insuring new ZEVs." However, CARB's promise "is based on the factually incorrect premise that the Department sets rates for private passenger automobiles," says Chief Deputy Insurance Commissioner Kenneth Gibson, adding that "the Department does not function as a rate setter."

CARB also agrees to "work with the State Banking Department to assist in securing financing for the purchase of ZEVs." In a letter to CARB Chairman John Dunlap, Assemblyman Bill Hoge, who sits on both the Assembly Banking and Finance Committee and Insurance Committee, wrote: "CARB appears to imply that it has the ability to somehow influence the State Department of Banking and Insurance to establish what might be construed as preferential rates for electric vehicles. These commitments, I assure you, over-estimate the authority of the Board."