By on June 4, 2009

California’s zero-emissions vehicle law could cost Toyota, darling of the environmental crowd, up to a billion dollars reports Bloomberg. That’s more than any other automaker is looking at. Why? Because by 2012, California will require that 3 percent of unit sales over a three-year period be zero-emissions models. Since Toyota has over 24 percent of the California car market (nearly double Honda, which is number two at 12.9 percent), it’s facing far stiffer requirements. And unlike Honda it doesn’t have a hydrogen fallback (although Honda’s FCX Clarity is not yet on sale). According to Bloomberg, Toyota will have to sell 16,000 plug-in hybrids (PHEVs) and EVs come 2012. “If you’re only discussing the cost of batteries and other components, a $1 billion cost for Toyota may be a stretch,” says Brett Smith of the Center For Automotive Research. “Add in all the things needed to support these vehicles — service, dealer training, marketing, warranties, new manufacturing equipment to get them into production, and [$1b] sounds reasonable” Toyota is declining comment on the exact cost of CARB compliance, but has already questioned whether PHEV demand will live up to enthusiast expectations.

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30 Comments on “CARB Rules Could Cost Toyota a Billion Bucks...”


  • avatar
    SunnyvaleCA

    What is Honda’s “hydrogen fallback” plan, powering internal combustion engines with hydrogen? BMW already demonstrated a gasoline/hydrogen dual-fuel vehicle. I believe that running on hydrogen was some 5x to 10x more expensive, but if it meets CARB rules and you can just use the gasoline part of the vehicle, I guess that it could work. Fuel cell cars powered by hydrogen are about the most expensive technology possible–both the fuel part and the up-front hardware part.

    I also don’t see how hydrogen is supposed to be “zero emissions.” Is it because it can be created from hydrolysis of water and electricity from a hydro-electric dam? In that case, ethanol is also zero emissions. The reality is that additional electricity comes from burning more natural gas and coal–all the “zero emissions” electricity as easily consumed by current uses.

  • avatar
    P71_CrownVic

    Go away California…go away.

    The ONLY thing California should be used as a model for…is what NOT to do.

  • avatar
    superbadd75

    Is the government going to subsidize Toyota to comply with these requirements? OR is there a DOE grant that they can get? GM and Chrysler get money to survive even though their troubles are self-inflicted (although not according to Fritz), so why shouldn’t the rest of the auto world get a little somethin’-somethin’ to pass bullshit CARB regulations? Just wondering. Not that I like paying for this shit, but hell, why not? It’s only money now.

  • avatar
    Cicero

    California’s abysmal legislature and sad joke of a governor have already proved that they know how to drive a populous, productive state into bankruptcy, so now they’re going to do the same with car manufacturers.

  • avatar
    dwford

    Boo Hoo. The CAFE rules penalize the Detroit automakers more because they sell more trucks. Yet another reason why NOT to let California set their own rules.

  • avatar

    Toyota can meet this mandate with a plug-in hybrid Prius and electric cars like an electric iQ.

    It will give Toyota a first mover advantage to spread its leadership in California to other places…

  • avatar
    tedward

    Mixed feelings here on this one. On the one hand California is one of the largest markets in the world, and can do whatever the hell it damn well pleases. If France, Germany, Japan et al. instituted a similar requirement we’d just say, well…play ball by the home rules or get off the field, but in the meantime, quit the bitching.

    On the other hand it really sucks to see any car company take an unnecessary hit right now (even Toyota), and where does Toyota find 16,000 suckmobile customers? It may very well be the case that California legislators are overestimating demand for these vehicles, which would be a real shame for CA car buyers and Toyota alike (looking forward to the most painful rebate program ever put forward by an OEM). Still, if 16,000 buyers can be found at a price over cost (even $1) then really, no big deal.

  • avatar
    stevenm

    If the higher-ups at Toyota have anything resembling a sense of humor– or perhaps tragedy is more fitting– they’ll call it the “EV-1″.

    This time for sure!

  • avatar
    tedward

    ““If at the end of the day the market says ‘we don’t want these cars,’ we may have to take a look the requirements,” said Gromis. “We have confidence that they will be accepted.””
    From the source article

    So the CA government dosen’t appear to have done it’s homework on this and it could be very very expensive for the OEM’s. Why am I not suprised? Anyone who thinks they’ll, “take a look at the requirements” before at least one round of penalty payments are made (and the manufacturers are committed to building these things en masse)isn’t cynical enough to vote responsibly.

  • avatar

    I also don’t see how hydrogen is supposed to be “zero emissions.” Is it because it can be created from hydrolysis of water and electricity from a hydro-electric dam? In that case, ethanol is also zero emissions. The reality is that additional electricity comes from burning more natural gas and coal–all the “zero emissions” electricity as easily consumed by current uses.

    If I run my gas-powered truck, but attach a hose to the exhaust and run it to my chimney, then it’s a zero emissions vehicle!

    John

  • avatar
    midelectric

    Toyota only has to sell 16k plug-in Priuses? They’ll be sold out in six months tops is my bet.

    The only thing here is the standard bitch and moan of auto manufacturers dragging their heels to provide a product people have been asking for for years.

    And the cost number is meaningless considering the cost circle is drawn as big or as small as necessary to support whatever point needs to be made. Does that $1b include the cost of the new brochures that need to be made up? Color printing is expensive!

  • avatar
    holydonut

    I wish guys like Brett Smith would qualify their statements with a bit more detail. Does this $1B number that he touts (which ends up in the headline post of this blog entry) just mean R&D? Or does it include capital investment as well? In both these cases it’s a fixed cost.

    Then he goes on to confuse the issue by bringing in warranty costs into the discussion. Warranty costs are variable cost and are reported as such on the income statement. Warranty may not be a material cost, but it spawns a contingent liability that is directly proportional to the number of vehicles sold.

  • avatar
    Richard Chen

    The first 150 plug-in Priuses are coming to the US shortly, will they all to California, then?

    press release

  • avatar
    Bancho

    PHEV and enthusiast were both used in the same sentence.

    My head asplode**!

    **Thanks Strongbad

  • avatar
    tedward

    “The only thing here is the standard bitch and moan of auto manufacturers dragging their heels to provide a product people have been asking for for years.”

    ok, but the problem is that the car companies don’t believe that those loud demands will necessarily translate to sales once the sticker price is posted. They would have made the move already if it was such a sure bet.

    My problem with this is what happens if there aren’t enough sales? The least the government could do is guarantee a state contract (at a prearanged, yet minor discount) for the cars if they remain unsold. At least CAFE affects all the vehicles in a fleet, this bill creates a new class of autos that people can choose to avoid entirely for the better driving, reasonably priced alternatives.

    If they guessed right and the cars move at sticker its not such a big deal.

  • avatar
    quasimondo

    What’s all of this crying and bellyaching about? Toyota has lots of money, and smart leadership. They’ll be just fine.

  • avatar
    mpresley

    It is an open question whether California will still be in business by 2012. Can a state file for C11?

  • avatar

    Wow if you follow the link to the Bloomberg story they have a link to the California auto dealers association website. It shows new car registrations in California through March of 2009.

    8566 Camrys versus 1055 Malibus or 297 Imapalas.

    2282 Siennas vs 369 Chrysler T&Cs or 312 Caravans

  • avatar
    cdotson

    Are you sure CARB requires ZEV “highway” vehicles?

    CARB has previously had percentage-driven ZEV requirements that spawned proliferation of the Neighborhood Electric Vehicles (NEVs). Glorified golf carts like Ford’s Th!nk, Chrysler’s GEM, and GM’s “Pathway” (which *WAS* a golf cart) vehicles filled this NEV requirement and allowed them to continue producing regular old cars. CARB dropped the ZEV requirement after a couple years of this lunacy figuring it was a dumb requirement because the manufacturers had leapt through the gaping loophole.

  • avatar
    wsn

    SunnyvaleCA :
    June 4th, 2009 at 3:08 pm

    What is Honda’s “hydrogen fallback” plan, powering internal combustion engines with hydrogen? BMW already demonstrated a gasoline/hydrogen dual-fuel vehicle.

    ———————————————-
    Internal combustion engines are so 1900.

    No, Honda’s Clarity FCX doesn’t use ICE. It uses a hydrogen fuel cell (i.e. hydrogen to electricity directly, with no combustion).

  • avatar
    apt34

    Ahh, so price increases to be seen both from additional overhead and having to artificially restrict supply of the vehicles people actually want just to comply with standards.

    Wonderful. As usual, this “type” of legislation and politics hit the poorest people the hardest despite the official party line that its for the “common man.”

  • avatar
    SunnyvaleCA

    Wsn: the Clarity FCX is how much actual cost of goods? $100k per unit? $500k per unit? More? The problem with hydrogen fuel cells is cost of the stack and longevity in a real-world environment. When cost is taken into account, hydrogen fuel cells aren’t going to be effective. Why put $100k (or more) into an Accord when you could put just $50k into an Elise.

    Contrary to what is implied by the original article, I think Toyota has the advantage with the Prius. They are already selling lots of them, so just add an extra $10k to $20k of batteries and bigger motors to meet the PHEV CARB requirement. If they eat $10k on 3% of their cars, that’s like eating $300 per car sold when the cost is spread out over the entire fleet.

  • avatar
    menno

    Look at it like this. Toyota has succeeded in giving customers reliable, efficient cars and has taken the bull by the horns and developed the best hybrid car technology.

    They’ve put plants into the United States, including a JV plant in CALIFORNIA.

    So, the “reward” they get is to be penalized big time.

    While the US Federal Government steals money from their American customers via taxation and inflation to prop up two zombie competitors.

    Perhaps if the Japanese auto makers would all actually stick together on this, and say “well, thanks but no thanks, we’ll just fold up all of our tents, and stop selling new vehicles in California” – this would suddenly make it impossible for other car companies to sell cars because if they increase sales, they’d have to increase sales of zero-emission vehicles which they wouldn’t have the capacity for, etc.

    See how that’d work? California would cave. Even if the population had to go to Sacramento and stretch the necks of every politician and CARP bureaucrat first, Californians would not give up their new cars.

  • avatar
    refugee

    CARB 2012 rules treat PHEV different than pure ZEV, and there has to be some ZEV’s in the mix. Pure ZEV = battery or fuel cell. Can Toyota lose a cool bil this way? You betcha.

  • avatar
    long126mike

    PHEV and enthusiast were both used in the same sentence. My head asplode**!

    You might wish to see this:

    http://karma.fiskerautomotive.com/

  • avatar
    RedStapler

    $1B strikes me as a bit on the high side. Assuming a $10k premium on the Plug-In Prius it is only $160M to sell 16k.

    For the sake of argument lets assume that the Ed Bergley Jr crowd is willing to pay $5k for the plug in package; this takes us down to a mere $80M. Still significant but not a deal breaker.

    The wild card in all of this the price of fuel. At $5/gal dealers will be selling for $5k over sticker and have a waiting list. At our current $2.50/gal it will be something of a dud.

  • avatar
    WetWilly

    It’d be great if all the automakers would grow a pair and say “We can’t meet CARB requirements so we’re going to stop shipping new cars to California.”

  • avatar
    refugee

    The money sink will be the BEV’s. You have to sell pure ZEV’s to comply, no matter how many PHEV’s you sell. The Bloomberg article doesn’t give the split, but it’s there.

  • avatar
    Kurt.

    I agree with WetWilly but I’d go one further…

    I’d combine all my Kalifornia dealerships into two GREAT dealerships in Reno and Las Vegas. Advertise “GREAT Deals” for California ID holders in Kalifornia.

    This would accomplish a couple of things. STUPID Kalifornians would have to drive to Nevada to get a car. They might change their opinion of their legislature and vote in responsible representitives. CARB would go away.

    Oh, by the way…CARB is no more. Now it is the Air Resources Board (as in they want to take ove the country…not just Kalifornia.)

  • avatar
    joeaverage

    I’m sure the CA gov’t would find a way to outlaw “imported” vehicles from Nevada.

    I could envision automakers selling plug-in cars at some reasonable price by raising the price of all their products by a few percent. Call it the cost of doing business in CA.

    Obviously CA is going to have to do something about the number of tailpipes pumping pollution into the air. I’m surprised they haven’t done more faster than this. There are plenty of articles from 40-50 years ago complaining about the pollution.

    I’m also flabbergasted by the amount of BS that people will put up with to live in that mess. High prices, unemployment, crowded cities, crowded roads, gangs, the porous southern border, etc.

    Am surprised that CA hasn’t begun taxing the heck out of their gasoline, taxing the bejesus out of vehicle registrations (except “green” cars), and reconstruction of the street car lines that GM and friends tore up in the 50s.

    CA is truly a preview of what Americans will put up with – pollution, immigration, taxes, COL, commutes, etc. They don’t have to worry about me coming to live there or perhaps even visiting there.

    I’m anxious for them to put highway capable EVs back on the roads b/c EVs will be available to the rest of us sooner.

    I figure Toyota will just build another RAV4-EV if they need to. Perhaps with Lithium batteries this time.

    Question: how many Prius batteries would it take to equal the RAV4-EV battery packs? Chevron might restrict how large the NiMH battery packs could be but could Chevron knock Toyota out for adding multiple Prius batteries to the same vehicle?


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