The car industry is about to collide head-on with the state government, and car manufacturers based in the Orange County region are bracing for the accident about to happen.
“All the manufacturers are in agreement,you’re heading for a train wreck,” said Jim Olson, the senior vice president of external and regulatory affairs for Toyota Motors’ North American headquarters in Torrance.
On Sept. 9, the California Air Resources Board unanimously reaffirmed its mandate that 10% of car manufacturers’ sales in California must be electric or hybrid vehicles by 2003, or the companies could face substantial fines.
In Orange County, where the U.S. headquarters of 10 car manufacturers are located, the carmakers said they intend to try to comply with the state’s mandate, but they believe it won’t be met.
“We don’t disagree with the (pollution) goals, but we think there are other means. We are trying to point out the realities of the costs involved,” said Kim Custer, a spokesman for Cypress-based Mitsubishi Motor Sales of America.
Ford Motor Co. owns six car companies with headquarters in Irvine: Lincoln-Mercury, Mazda, Jaguar, Volvo, Aston Martin and Land Rover. Its spokesman on this issue said the market for electric and hybrid vehicles is “not that big.”
“Everyone agrees that this 10% mandate is too high,” said Kelly Brown, director vehicle and environmental engineering for Ford Motor Co.
The six largest sellers of vehicles in California,Ford, Daimler Chrysler, General Motors, Honda, Toyota and Nissan,must have 4% of their vehicles pollution-free in the year 2003, with another 6% being low-emission vehicles. The state of technology means electric vehicles for the former and hybrids,powered by a combination of batteries and a small internal combustion motor,for the latter.
Manufacturers selling 4,501 to 35,000 vehicles annually in California,a group that includes OC-based Kia, Mazda, Mitsubishi, Hyundai, Jaguar, Land Rover and Volvo,must have 10% of their sales be low-emission hybrids by 2003. Another OC-based manufacturer, Suzuki, said it broke the 4,500-vehicle threshold last year and expects it will have to comply by 2005.
In 1999, 1.2 million new cars were sold in California, the same as in 1998. If those numbers hold for 2003, car manufacturers will have to sell at least 120,000 electric or hybrid vehicles that year.
Since electric cars have not caught on with the public and most manufacturers have stopped selling them, and since hybrids are just being introduced, the chances of meeting this mandate are slim.
But if the car manufacturers don’t meet the mandate, they face fines of up to $5,000 per vehicle.
“The rules allow the air board to assess civil penalties for not doing it,” said Jerry Martin, a spokesman for the California Air Resources Board. “We expect them to comply. The penalties are $5,000 per each vehicle that the manufacturer doesn’t produce to meet this mandate.”
Electric Vehicle Cost High
Still, it might be cheaper to not produce the electric vehicles, which the manufacturers said are far too expensive for the average consumer.
The cost for each electric vehicle Toyota produces “is in the six figures,” Olson said.
“We could not sell these vehicles at a profit, not even at break-even. The regulation is going to have to change in some way,” Olson said.
Ford’s Brown said electric vehicles cost on average $22,000 more than a similar model with a gasoline motor.
“The prices are so out of whack,” he said.
The carmakers have been hoping to get the mandate eased, but they are facing formidable foes.
The head of the Air Resources Board is Alan C. Lloyd, a former chief scientist at the South Coast Air Quality Management District, where he was one of the biggest supporters of the electric vehicle. He is a long-time expert on alternative fuels.
The board is also bipartisan. Of its 11 members, only five have been appointed by Gov. Gray Davis while the other six were appointed by previous Gov. Pete Wilson.
None are from the automobile or petroleum industries nor are there any representatives of big business on the board.
In favor of the mandate are groups like the American Lung Association of California, the California League of Conservation Voters and Ralph Nader’s California Public Interest Research Group. Cities in favor include San Francisco, Palm Springs and Santa Monica. Notably, no Orange County city is in the main lobbying group, the California ZEV Alliance.
Nader’s group charged that the automobile and oil industries have spent $32 million in the past three years to influence legislators to overturn this regulation.
“Among car companies, Ford was the most vocal in the halls of Sacramento, with $895,000 spent on lobbying,” said the report.
Hyundai was the only other Orange County company mentioned in the report, for its campaign contribution of $8,006 over the past three years.
Possible Change on Horizon
At last week’s hearing, the board left open a possibility that it might change its stance. The board asked its staff “to develop and propose regulatory modifications and other steps that address the challenges associated with the successful long-term implementation of the ZEV program,in particular, the need for product availability and market stability … and the need to reduce or mitigate the high initial costs of vehicles and batteries in low-volume production.”
At least one car manufacturer representative interpreted this to mean that the board might ease up. However, Richard Varenchik, another spokesman for the Air Resources Board, said it will not deviate from the 2003 deadline, the 10% mandate or permitting some of the cars to be hybrids.
“These are areas that the board considers untouchable,” he said. “The things that the board is talking about are working with the auto industry to bring the costs of the vehicles down, encourage better marketing and the possibility of incentives to help people get the vehicle.”
In August, the state Legislature approved a bill to create an $18 million subsidy to encourage Californians to lease electric vehicles. The typical lease is about $450 a month and this subsidy would pay roughly $250 a month for each electric vehicle. Currently, there are 2,000 users of electric vehicles in California.
But Ford’s Brown said the subsidy is only a fraction of what’s needed. The vehicles each would need a $20,000 subsidy to close the gap with gas-powered models. For 50,000 vehicles, Brown said, “that’s a billion dollars.” And that would not cover all the cars under the 10% mandate.
The debate over electric cars dates back to 1990, when the Air Resources Board mandated that 10% of all cars sold in California be non-polluting vehicles by 2003. The only such vehicle on the road that could meet this mandate is the electric vehicle.
In 1998, the state relaxed the gradual phase-in of the rule. It also said only 4% of the vehicles had to be electric while the other 6% could be hybrids. The state also asked the car companies to try a program to test EV vehicles, which the car companies did.
Little Public Support
The electric vehicle has failed to capture the imagination of the public. The two main criticisms have been a lack of range,100 miles at tops,and the six to eight hours needed to recharge.
EV supporters said the car companies haven’t really tried.
But all of the car manufacturers said they have experienced severe problems in producing the electric vehicles. They argue that today’s gas-powered vehicles emit far fewer pollutants and thus the smog isn’t as bad as 10 years ago.
The car manufacturers said they are reluctantly preparing for the new mandate. Mitsubishi is considering introducing a hybrid or electric vehicle. Lincoln Mercury and the other car companies owned by Ford aren’t expected to make electric or hybrid vehicles, but Ford will make the electric vehicles to meet its quota and then pass the costs on to its local companies.
“Those brands will have to help subsidize the costs,” said Brown. n
