Why Toyota And Ford Hooked Up: It's The CAFE Credits, Stupid
Today’s announcement of a memorandum of understanding between Ford and Toyota, uniting the two firms’ pickup truck hybrid drivetrain efforts, took quite a few industry-watchers by surprise this morning. As the industry leader in hybrid technology, Toyota has limited past hybrid cooperation to licensing its drivetrain wholesale to Nissan and a patent-sharing agreement with Ford. Moreover, the last big alliance aimed at developing hybrid technology for full-sized pickups, the Two-Mode V8 hybrids developed jointly by GM, Chrysler, Mercedes and BMW, have been a huge flop on the market, with the German partners walking away from the technology after using it in only a single application each (X5/X6, and ML Hybrid). Though Toyota and Ford have worked together to prevent a messy patent war over hybrid technology, there was little to suggest that they would take the cooperation any further, let alone join forces to hybridize full-size pickups. But if you’re looking to the marketplace to explain the Ford-Toyota tie-up, you’re looking in the wrong place: this is all about the freshly-announced CAFE standard and its generous credit system.
Of course, that’s not how the move is being pitched… at least on the surface. But in his announcement of the deal, Toyota Executive VP Takeshi Uchiyamada makes it clear that the hybrid and telematics alliance is entirely focused on the US market, saying:
Our collaboration with Ford is a move to make hybrid technology more widely available in sport-utility vehicles and in trucks. Those kinds of models are indispensable to American customers. And providing them with our hybrid technology will help conserve energy and reduce output of greenhouse gas here in the United States. That was our thinking in considering the collaboration.
How does Uchiyamada-san know how “indispensable” full-sized pickups are to Americans? The issue of full-sized trucks has dominated the debate over 2017-2025 CAFE standards, with the industry and its allies intervening to lower truck standards and increase the credit loopholes that make it easier to keep pickups relatively thirsty. This had two effects: first, the lowering of truck standards confirmed that large pickups would be worth investing in over the long term, and second, one loophole in specific provides huge incentives to hybridize full-sized trucks.
The agencies intend to solicit information on technologies that offer significant increases in fuel efficiency and reduction in greenhouse gas emissions. We intend to propose a credit for manufacturers that employ significant quantities of hybridization on full size pickup trucks, by including a per-vehicle credit available for mild and strong hybrid electric vehicles (HEVs). This provides the opportunity to begin to transform the most challenging category of vehicles in terms of the penetration of advanced technologies, allowing additional opportunities to successfully achieve the higher levels of truck stringencies in MY 2022-2025.
In other words, not only did the government reduce the required rate of efficiency improvement for trucks to nearly half what it is for cars, they also went a step further by giving credits for specific (i.e. hybrid) technology. Absent these credits, it’s highly likely that truck-dependent manufacturers would have looked to diesel power as a way to cheaply provide high-torque, high-efficiency truck powerplants, but with the feds placing their finger on the scale in favor of hybrids, Ford has no choice but to invest in the technology. And as the only Detroit-based (and therefore heavily truck-dependent) automaker to not have access to the Two-Mode technology, Ford had to move fast to find a partner. Though Chrysler and GM’s Two-Modes may not have been successful so far, they at least provide the building blocks for future development.
Besides, as we read more about the hybrid pickup credits, it’s clear that even if the 2017+ hybrid pickups aren’t super-efficient, the credits make them incredibly valuable.
The agencies intend that access to this credit is conditioned on a minimum penetration of the technology in a manufacturer’s full size pickup truck fleet, with defined criteria for a full size pickup truck (e.g., minimum bed size and minimum towing capability). The agencies intend to propose that mild HEV pickup trucks are eligible for a 10 g/mi12 credit during 2017-2021 if the technology is used on a minimum percentage of a company’s full size pickups, beginning with at least 30% of a company’s full size pickup production in 2017 and ramping up to at least 80% in 2021. Strong HEV pickup trucks would be eligible for a 20g/mi credit during 2017-2025 if the technology is used on at least 10% of the company’s full size pickups.
The agencies will propose specific definitions of mild and strong HEV pickup trucks, but expect to include stop/start, regenerative braking, minimum motor power, minimum battery voltage value and minimum energy storage capacity, or similar types of objective metrics. The agencies expect that a “mild” HEV will include moderate hybridization and not just start/stop, and that a “strong” HEV will include launch assist.
Let’s assume for the moment that the Ford-Toyota pickup drivetrain, which each company will integrate into future vehicles independently of one another, meets the government’s requirement for “strong” hybrids. If you look at the changes in maximum truck C02 targets from 2017-2025, they increase by the following amounts:
But under this credit system, if ten percent or more of your truck fleet have “strong hybrid” drivetrains, each truck earns a 20g/mile credit which can be applied to under-complying vehicles, “banked” for future under-compliance or “carried-back” for past under-compliance. In theory, this also means that a 2017 model-year pickup that exactly met the maximum CO2 target for that year would add 14.5g/mile to the automaker’s fleetwide efficiency rating in 2018, without improving its efficiency at all. In 2019, it would add 11.4g/mile in credits without improving efficiency, by 2020 the credit would shrink to 9.5 and in 2021 it would still be adding 7.6g/mile in credits despite not improving since 2017. If, for example, Ford had decided it could meet CAFE in that window with diesel technology alone, it would only receive additional credits if it “significantly” overcomplied with the standard, year-by-year. To wit:
The agencies also intend to propose a performance based incentive credit for full size pickup trucks which achieve a significant reduction below the applicable target. This credit could also be on the order of 10-20 gm/mile vehicle. The same vehicle would not receive credit under both the HEV and the performance based approaches.
Without a hybrid pickup drivetrain to build off of the way GM and Chrysler do, Ford has two choices for its truck strategy in 2017 and beyond: either keep costs as low as possible and hope it can undercomply with improved gas and diesel engines and improved aerodynamic efficiency and/or weight loss, or find a partner for hybrid technology and receive significant credits tied only to its use of hybrid technology rather than its actual efficiency. If that’s not a no-brainer, I don’t know what is.
But what does Toyota get out of the deal? Though it’s the clear leader in hybrid technology, its drivetrains have all been been based on transverse engines and front-wheel drive. Toyota’s expertise in full-sized, American-market trucks pales in comparison to Fords, and at this point it could even be said that Ford has the head-start on hybrid pickups, having begun joint development (with CCEFP and Folsom Technologies) on a hydraulic hybrid F-150. Autopacific analyst Dave Sullivan has another take, writing at vehiclevoice.com that
Based on the press conference today, it pretty much sounds like Toyota has a RWD hybrid system in development but they need Ford’s sales volume to make it work from a cost perspective.
Whether Toyota or Ford started development first almost doesn’t matter (the press release says “both companies have been working independently on their own future-generation rear-wheel drive hybrid systems”). For Ford, a hybrid pickup drivetrain is must-have technology, due to the CAFE loopholes. For Toyota, which is less dependent on full-sizers, the need isn’t quite as dire (as CAFE offers plenty of credit opportunities for plug-in cars), but Sullivan is absolutely right that having Ford as a partner will lower costs dramatically. All in all, the deal seems to be a win-win… if only because of the way future CAFE standards were written.
More by Edward Niedermeyer
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Mia Hey there!I recently stumbled upon the Crack Eraser DIY Windshield Repair Kit (check it out here: https://crackeraser.com/collections/diy-windshield-repair-kits) and decided to give it a shot on a small chip in my windshield. I have to say, it worked like a charm! Super easy to use, and it saved me a trip to the professionals. If you're dealing with a similar issue, this kit is definitely worth considering. 😊
- Rust-MyEnemy Whoa, what the hell is wrong with Jalop1991 and his condescension? It's as if he's employed by Big Plug-In or something."I've seen plenty of your types on the forums....."Dunno what that means, but I'm not dead keen on being regarded as "A type" by a complete stranger"" I'm guessing you've never actually calculated by hand the miles you've driven against the quantity of gas used--which is your actual miles per gallon."Guess again. Why the hell would you even say that? Yes, I worked it out. Fill-to-fill, based on gas station receipts. And it showed me that a Vauxhall Astra PHEV, starting out with a fully charged PHEV battery, in Hybrid mode, on my long (234-mile) daily motorway daily commute, never, over several months, ever matched or beat the economy of the regular hybrid Honda Civic that I ran for a similar amount of time (circa 5000 miles)."You don't use gasoline at all for 30-40 miles as you use exclusively battery power, then your vehicle is a pure hybrid. Over 234 miles, you will have used whatever gas the engine used for 200 of those miles."At least you're right on that. In hybrid mode, though, the Astra was using battery power when it wasn't at all appropriate. The petrol engine very rarely chimed in when battery power was on tap, and as a result, the EV-mode range quickly disappeared. The regular hybrid Civic, though, deployed its very small electric reserves (which are used up quickly but restore themselves promptly), much more wisely. Such as when on a trailing throttle or on a downward grade, or when in stop-start traffic. As a result, at the end of my 234 miles, the Civic had used less gas than the Astra. Moreover, I hadn't had to pay for the electricity in its battery.I look forward to you arguing that what actually happened isn't what actually happened, but I was there and you were not."Regardless, that you don't understand it appears not to have stopped you from pontificating on it. Please, do us all a favor--don't vote."You really are quite unpleasant, aren't you. But thanks for the advice.
- Tassos Jong-iL Electric vehicles are mandated by 2020 in One Korea. We are ahead of the time.
- 1995_SC Can you still get some of the tax credits under the new program?
- Analoggrotto HyundaiGenesisKia saw this coming a long time ago and are poised for hybrid and plug-in hybrid segment leadership:[list=1][*] The most extensive range of hybrids[/*][*]Highest hybrid sales proportion over any other model [/*][*]Best YouTube reviews [/*][*]Highest number of consumer reports best picks [/*][*]Class leading ATPs among all hybrid vehicles and PHEVs enjoy segment bearing eATPs[/*][/list=1]While some brands like Toyota have invested and wasted untold fortunes into full range electric lineups HyundaiKiaGenesis has taken the right approach here.