Toyota's zero-emission CARB complaince could cost $1 billion
Toyota Highlander FCV - Click above for a high-res image gallery
Here's an ugly number. In order to meet the State of California's zero-emission vehicle requirements, Toyota might have to spend over a billion dollars. The $1 billion isn't a fine, but an estimate of what it will cost Toyota to make sure it has enough zero-emission vehicles to sell in the California market by the time the automaker's 2012 models go on sale (i.e., very soon).
The ugly number comes from "a person familiar with the matter" who spoke with Bloomberg. According to an industry analyst also quoted in the piece, the reason that Toyota could face this huge cost is that the GM and Chrysler bankruptcies and associated slow sales mean that Toyota now has a larger market share (24.1 percent) in the state. California law says that three percent of unit sales over a three-year period have to be non-polluting models. With Toyota in the sales lead (the next highest market share belongs to Honda, with 12.9 percent), it will fall on them to bring the cars to market. A California Air Resources Board air pollution specialist told the paper that the California sales targets for 2012 to 2014 include 7,500 zero-emission (hydrogen fuel cell or battery-electric) vehicles and more than 60,000 PHEVs from all automakers. That's a tough goal, but at least Toyota has the popular Prius to build from. Find more details here.
Gallery: 2010 Toyota Prius - First Drive
[Source: Bloomberg]
Reader Comments (Page 1 of 2)
paulwesterberg 2:08PM (6/04/2009)
A person "familiar with the matter" wouldn't happen to be Gary Witzenburg?
Toyota can meet these goals easily and the r&d will pay for itself. They are already testing a plug in prius with a larger lithium battery. The toyota iq platform could easily be converted to a low cost BEV that would easily sell well over 7,500 units in 3 years.
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UH2L 2:26PM (6/04/2009)
How do you know that Toyota can meet these goals easily. Did you ever work in their emissions/powertrain R&D department and figure out engineering and development budgets? Probably not.
In a way, it's good that Toyota is complaining because it shows that when the Detroit 3 voice their concerns, that they are legitimate. It's sad but true that many people don't like to listen to Detroit.
I'm all for more stringent fuel economy and emissions standards, but they have to be ramped up slowly. There are technical hurdles. It's not like microchips and computers and software where you're moving electrons around. Vehicles carry the most precious cargo of all, people. Throwback also makes a good point, how can you make people buy these vehicles if gas prices stay low and not enough green people will pay extra for the technology? It will probably take heavy incentives.
paulwesterberg 2:49PM (6/04/2009)
Gas prices will not stay low, even during this recession people in india and china continue to buy more cars. Oil is currently at $65.88 a barrel making tar sands profitable again.
Gas prices are on the rise and will peak over $3 just in time for "independence day".
http://www.fuelgaugereport.com/
Throwback 2:59PM (6/04/2009)
Paul you are assuming that oil will go up so there will be sales. The question is still how do you MANDATE sales? The law is holding the manufacturers responsible for buyers preferences. Toyota can't make someone buy a particular model.
paulwesterberg 2:59PM (6/04/2009)
> It will probably take heavy incentives.
Incentives are already in place, up to $7,500 in federal tax breaks for plug in electric vehicles:
http://en.wikipedia.org/wiki/Plug-in_hybrid#United_States
Mike!!ekiM 3:08PM (6/04/2009)
Lucky CA.
All the Plug-in's will be going to California. Sheesh...
EB 2:09PM (6/04/2009)
Previously, didn't OEM's buy up NEV makers (Chrysler>GEM, Ford>THINK) to meet this requirement? Seems like that could be part of Toyota's strategy (along with making highway EVs) and would cost less than $1B.
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paulwesterberg 2:41PM (6/04/2009)
1. Buy tesla(recently valued around $550 million).
2. Build & mass produce the model S.
3. Sell 7,500 vehicles per year.
4. Profit!...and exceed CARB standards.
Throwback 2:09PM (6/04/2009)
"California law says that three percent of unit sales over a three-year period have to be non-polluting models."
How do you mandate sales? Supposed people just won't buy 3% of Toyotas non-polluting models? Does this mean Toyota has to stop selling other models just to ensure they hit the 3% number? Not a great way to run a for profit busines, don't sell what people want to buy.
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Chris M 3:05PM (6/04/2009)
While there is market potential for EVs, you're probably right, there could be problems meeting those requirements, especially since we don't really know exactly how much of a market there will be. If there were only 2 or 3 competitors in a small ZEV market, it might be a profitable niche market, but if all the auto makers are forced to compete for the same market share, there is a risk that all might fail - that's basically what went wrong with the first ZEV mandate.
I propose instead that all new car dealers be required to offer at least 1 ZEV model to their customers, then we'd have a more accurate view of what the market will bear. Those auto companies that did decide to make zero emissions vehicles could then provide them to the dealers for the auto companies that didn't want to jump into the ZEV market.
paulwesterberg 3:10PM (6/04/2009)
If toyota doesn't reach mandated sales limits for ZEVs that just means they will be restricted in the number of highly polluting vehicles they can sell.
But I don't think the 3% sales limit would be difficult for a company like toyota to meet. All you need to do is make the vehicle affordable and well designed and it will sell itself.
The plug in prius they will release in 2010 should easily sell 60k vehicles in California - as long as they keep a similar price point. Using at least a 4kWh battery battery pack combined with federal incentive should help in that regard.
Nick P. 2:34PM (6/04/2009)
Yep, dragging their feet, kicking and screaming all the way to the bank...
"But I don't want to build pure EV cars! Leave me me alone!" yells Toyota...
- Nick -
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augustus 3:26PM (6/04/2009)
Oh yes you convinced me. The company that markets themselves as the eco car company (thanks Prius) is actually unwilling to make an EV and must be dragged into doing the right thing by enlightened CA bureaucrats.
Perhaps the technology and reliability aren't there and the costs are too high? Perhaps Toyota considers powering your car with laptop batteries to be an unacceptable risk? Perhaps Toyota is worried about making a car whose batteries hold less power over time so that the car is eventually unusable for your commute?
Nonsense! It must be an oil conspiracy!
augustus 3:22PM (6/04/2009)
Paul wrote:
"But I don't think the 3% sales limit would be difficult for a company like toyota to meet. All you need to do is make the vehicle affordable and well designed and it will sell itself."
Soooo simple! All Toyota has to do is whip the pixies that build their cars harder so that they build more, better, affordable magic cars! No concern for testing schedules, no concern for cost, no concern for anything just you know, make it affordable and well designed! Hello, do you encounter reality much? Did you notice that this is Toyota that is complaining about this?
How will Toyota make their unicorn produced electric car affordable so that 3% of their sales are of this vehicle? They will add $100 to the cost of every other vehicle so that they can subsidize their EV. So all the lower income people who buy a Corolla will subsidize The Faithful who will be able assuage their dirty conscience.
"The plug in prius they will release in 2010 should easily sell 60k vehicles in California - as long as they keep a similar price point. Using at least a 4kWh battery battery pack combined with federal incentive should help in that regard."
Why would they keep the same price point? Lets see will a new lithium battery cost as much as their current NiMH battery? No way. Will the larger electric engine (needed to power you to speeds greater than 25 mph in a time that people find to be acceptable) cost as much as the current smaller electric motor? No way. Also It seems that the plug in Prius will only go 10 miles on battery power so it probably won't qualify as an EV.
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paulwesterberg 4:35PM (6/04/2009)
Toyota is already testing a "magic" plug in prius with lithium batteries right now. They will sell test vehicles for fleet use by the end of 2009. A 4kWh battery pack does qualify for incentives.
An easy way for toyota to game the system would be to limit the cars available to dealers in Oregon, Nevada and Arizona and then build a few new dealerships to sell low emissions vehicles on the California border.
But how would these people from out of state drive their new limited-range zev home?
I bet that the standard doesn't say anything about range extenders on trailers.
paulwesterberg 4:55PM (6/04/2009)
Or better yet toyota could sell ZEVs online only with their website headquarters located in California. Toyota dealers could give test drives and collect referral bonuses.
Btw whois for toyota.com reveals that the website's registered address is in Torrance, CA
why not the LS2LS7? 4:03PM (6/04/2009)
If I were Toyota, I don't think I'd bother. CARB will cancel these regs when it's clear none of the companies can meet them.
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augustus 4:08PM (6/04/2009)
As they did with the last round of EV rules.
Eventually even CARB will concede to reality.
paulwesterberg 4:38PM (6/04/2009)
Or they could meet the weak standard and own the California market.
BlackbirdHighway 4:16PM (6/04/2009)
I'm not understanding the part about why it's a problem that Toyota has the biggest market share. Shouldn't that be a good thing?
Toyota just increased production of the Prius to 500,000, so I'm not buying the whole "there's no market for green, efficient cars".
And they keep telling us how great the HFCV are, so why get going and sell a few?
If they get really desperate, they could always dust off the RA4EV, maybe update it with lithium batteries. I'm sure Tesla would be glad to help, for a small fee.
Even if they have to sell EVs at a small loss, they can just call it the cost of doing business in California and raise the prices slightly on the other 97% to make up for it. Since all the competitors are in the same boat, that doesn't put them at such a big disadvantage.
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