Will CARB’s Eased ZEV Rules Grow Cleaner-Car Demand?

The California Air Resources Board’s modification of its tough zero-emissions mandate, allowing some automakers to try and reach their prescribed manufacturing targets with hybrid-electric vehicles instead of zero-emissions vehicles only, leaves the companies hopeful the typically unrelenting regulatory panel may be open to further changes.

“Volvo Cars is satisfied with most of CARB’s recent decisions, though we are still working together to find a win-win scenario for compliance credit requirements,” Katherine Yehl, director-government affairs for Volvo Cars, tells WardsAuto by email.

Alex Fedorak, a spokesman for Mitsubishi Motors North America, says his company “supports the intent of the ZEV mandate – increased sales of plug-in electric vehicles. We believe the most recent decision is a good step forward.”

However, straying from CARB’s exclusive emphasis on EV technologies, he adds, Mitsubishi is pursuing “highly efficient internal-combustion engines” in addition to EVs and PHEV technologies.

“This is a global effort and requires all stakeholders to work together to transform the on-road vehicle fleet to meet the challenges of fuel conservation and greenhouse gas reduction,” Fedorak says, “specifically, the development of alternative-fuel refueling infrastructure and market development.”

Volvo and Mitsubishi, along with Mazda, Jaguar Land Rover and Subaru, comprise the group of intermediate-volume manufacturers that, due to their limited resources in relation to bigger automakers, have asked to be exempt from the zero-emissions production requirements. Each of the five automakers pulls in less than $40 billion in revenues annually.

The regulatory agency opted instead to give the so-called IVM5 both an added hybrid option and a later compliance date of Jan. 1, 2018, by which time each company will be expected to have an approved pure ZEV or hybrid transitional ZEV (TZEV) on the market.

In the state’s complicated way of determining ZEV credits, though, the TZEVs would earn fewer credits than pure ZEVs. If an automaker’s sales of TZEVs fell short of the amount of credits demanded by CARB, however, it could buy those credits from another party.

Tesla has emerged as a likely merchant in such transactions, as its EV-only operation has amassed a stockpile of extra ZEV credits over the years. Other automakers such as General Motors and Toyota also have credits to spare.

David Clegern, public information officer for CARB, tells WardsAuto in a phone interview that TZEVs, which are not considered full hybrids, are counted as ZEVs “under our regulations because for most local driving, which is the majority of trips taken, they do not run on fossil fuel.”

Because TZEVs earn fewer credits than BEVs and hydrogen fuel-cell vehicles, he continues, the intermediate manufacturers, who “generally do not have the model line to permit them to develop a plug-in and BEV or FCEV simultaneously...will have to deliver more cars than the large manufacturers, because they have the same credit requirements.

“California will reach its ZEV targets.”

The minimum ZEV production requirement has been boosted over time, as CARB seeks to meet the state’s goal of 1.5 million ZEVs on roads by 2025.

Sales Pacing Below Targets

Meanwhile, ZEV adoption rates are running far short of the sales needed to hit the 2025 expectation. Only an estimated 100,000 ZEVs currently ply the Golden State’s highways.

Out of 1.85 million vehicles sold in California last year, pure EVs accounted for 29,531, or 1.6% of the market, while the 29,949 PHEVs represented another 1.6% of the market, according to data from the California New Car Dealers Assn.

Through the first quarter of 2015, EVs accounted for 1.7% of the market and PHEVs 1.1%.

California's meager ZEV numbers fall in line with the number of EVs nationally, according to WardsAuto, which estimates 336,954 battery EVs and PHEVs have been sold in the U.S. since 1997.

President Obama promised 1 million BEVs and PHEVs on America’s roads by 2015.

Peter Welch, then-president of the CNCDA, warned in 2012 that if CARB held fast to its mandate – that ZEVs and PHEVs account for one of every seven new cars sold in the state in 2025 – the state could suffer a vehicle-market downsizing sometime around 2018.

“We’re going to hit a brick wall,” Welch predicted.

Gloria Bergquist, vice president-public relations for the Alliance of Automobile Manufacturers, noted at the same time if “automakers are already producing advanced-technology vehicles, and if there is market demand for them, a mandate is not needed.”

Dan Ryan, manager-government and public affairs for Mazda USA, says his company accepts CARB’s latest decisions, but “the bigger question is, are the (ZEV targets) feasible...evidence shows that consumers are not embracing (EV) technology...the compliance requirements should be reviewed.”

So far, he says, Mazda hasn’t settled on any specific approach to meeting California’s standards, but he wishes CARB officials would set the overall numbers they want, then leave automakers up to their own devices.

“Give us the goal and let us figure out how to get there,” Ryan says.

The new ZEV regulations aren’t finalized and CARB is set for a midcycle review of its ZEV regulations next year, meaning compliance requirements for automakers could be further changed.