California Carves Out PHEV Exception For Smaller Automakers

By 2018, any automaker that wants to sell cars in California needs to build either electric or hydrogen vehicles, or spend a lot of money buying Zero-Emissions Vehicles (ZEV) credits from companies like Tesla. At least, that’s how it was supposed to be. Automotive News reports that after hearing pleas from five smaller automakers, including Mazda and Mitsubishi, the California Air Resource Board has decided to tweak its ZEV rules to help smaller companies meet the mandate.

Mazda and Mitsubishi were joined by Subaru, Volvo, and Jaguar-Land Rover in appealing for a waiver or exemption to California’s 2018 ZEV mandate. These companies wanted to be totally exempt, claiming their small R&D budgets make it prohibitively expensive to develop dedicated hydrogen or electric cars, and California regulators agreed, to a point. Rather than allow a complete negation of the ZEV rules, California will allow any automaker with less than $40 billion in global revenue to get ZEV credits for plug-in hybrids, instead of just electric and hydrogen cars.

Only Mitsubishi and Volvo offer any plug-in powertrains. Subaru and Mazda both offer standard hybrids, though the Mazda3 hybrid can’t be bought in America, and Jaguar-Land Rover offers no vehicle electrification whatsoever. None of these companies are aligned with larger global automakers either, severely limiting their access to plug-in vehicle technology. Yes, Tata owns Jaguar-Land Rover, but Tata is a none-factor in the auto industry outside of southeast Asia and its alt-fuel drivetrain portfolio is mighty thin.

These smaller companies will still need to sell X amount of plug-in hybrids, or otherwise buy ZEV credits to make up the difference, but not everybody is fond of the change. Tesla’s director of business development Ken Morgan told AN that this change could mean that just 600,000 ZEVs would be sold through 2025, instead of Governor Jerry Brown’s more ambitious 1.5 million vehicles. Tesla hasearned hundreds of millions of dollars on the ZEV market, and Morgan notes that there is currently an oversupply of ZEV credits on the market, pushing the price of these credits down. If buying ZEV credits ends up being cheaper than actually developing and building zero-emissions vehicles, than these smaller automakers may still end up not building any plug-in vehicles at all.

Some regulators are pushing for a greater emphasis on plug-in hybrids for larger automakers as well, and a mid-term review next year could see more changes made to the program. Hopefully history isn’t repeating itself, as the last time California’s Air Resource Board “adjusted” its ZEV program, it led to the wholesale recall and cancellation of just about every major vehicle electrification program.

Hold on tight kids, this could get bumpy.