Looking at the numbers behind China and California’s zero emission vehicle mandates

Auto Shanghai 2017 has been full of “new energy vehicle” announcements for the Chinese market from major and startup automakers. General Motors has plans to launch 10 all-electric and plug-in hybrid models by 2020. Ford, Volkswagen, and Nissan, all have aggressive plans for the market. Chinese startup NextEV displayed 11 vehicle concepts from its all-electric NIO brand.

Behind all of it is the top global market for plug-in electrified vehicle sales and proposed government mandates for increasing those sales. China is interested in following California’s zero emission vehicle (ZEV) structure mandating an even higher percentage of sales to hit these targets with a credit trading scheme backing it up. But how realistic is it for China to meet its mandates – and for California?

China’s Ministry of Industry and Information Technology proposed last fall that ZEVs represent 8% of new vehicle sales as soon as 2018, and that would go up to 12% by 2020. Included in those numbers would be all-electric, plug-in hybrid, and fuel cell vehicles covering light, medium, and heavy duty vehicles. That includes all new cars, trucks, and buses sold in the country.

Companies that fail to meet the 8% requirement would face fines or have to buy credits from those that exceeded the minimum. That percentage score comes from weighted averages assigned to various zero- and low-emission vehicles. As in California, automakers that fail to meet the requirement face fines or have to buy credits from those that exceeded the minimum.

Average production of new energy vehicles last year may have contributed only about 3% of the score required, 5 percentage points short of the proposed 2018 target, according to the China Association of Automobile Manufacturers.

During 2016, there were about 507,000 new energy vehicles sold in China. As for total new vehicles sold in the country, there were about 28.03 million sold. As for the percentage of sales, NEVs accounted for about 1.8% of new vehicles sold; the government’s weighted averages brought it up to 3% in the scoring system.

China is considering blocking or delaying these proposed measures after industry feedback concluded that the targets are overly ambitious. It may be finalized by May or June, according to a government official.

Automakers are backing China’s goals, but are feeling a lot of anxiety about getting anywhere near close to selling 8% of total sales as ZEVs by 2018 – even if credit trading and a flexible point system helps ease the burden.

For those consumers and fleets making vehicle purchases in China, large sedans and SUVs are quite attractive. Many of these consumers are experiencing their first-ever high incomes, and are supporting China’s economic growth by spending a lot of it on vehicles, housing, mobile devices, entertainment, travel, and personal investments.

For now, buying vehicles that consume a lot of fossil fuel is just fine with car shoppers. A clear example of this is that first quarter 2017 SUV sales soared 21% from a year earlier to 2.4 million in China, while electric vehicle purchases declined 4.4% to just 55,929, reports Associated Press. Incentives were down on NEVs after the first of the year, which was thought to have an impact on NEV sales. If the current rate continues, it could finish the year below last year’s 507,000 plug-in vehicles sold.

Last year, California saw 62,166 plug-in electrified vehicles sold. Overall, the state had 2.1 million in new vehicle sales, with PEVs making up about 2.96% of total sales.

California Governor Jerry Brown’s ZEV goal is for the state to have 1.5 million ZEVs on its roads by 2025. That means about 15% of new vehicle purchases will need by to be ZEVs by 2025, or about 12% of sales higher than where it is now.

Commercial vehicles, such as medium- and heavy duty trucks, vans, and buses, are included in California’s ZEV sales data, similar to China. Both governments also include hydrogen fuel cell vehicles in those totals. Those sales volumes are quite small, but California is still leading the way on fuel cell vehicles and fueling stations. China has yet to see any fuel cell vehicle sales, though Toyota and other automakers plan to enter that fuel cell market.

China’s national government has been cracking down on vehicle manufacturers committing fraud in their NEV production and sales numbers to tap into generous government subsidies. That’s always been a concern for advocates of emission reduction targets around the world – that subsidies could be a scam and that credit trading can water down the end goals of the mandates.

China and the European Union are expected to keep strict mandates in place for the sale of ZEVs in those markets. The U.S. is expected to soften fuel economy and emissions rules under the Trump administration, though some analysts expect that consumers and fleets will increase demand in fuel efficient vehicles and that the nation’s current level of about 1% of new vehicle sales going to PEVs will be seeing an increase soon.

Most of the studies on ZEV goals being met point to a few recommendations:

  • Staying with subsidies including low-interest loans and rebates to vehicle manufacturers, and rebates and tax incentives available to consumers and fleets. These will need to be supported by cash-back incentives and finance programs from OEMs sometimes tied to dealer programs.
  • Continuing to bring down acquisition cost by making the battery packs and electric drives more affordable and cost competitive.
  • Increasing the range of all-electric, plug-in hybrid, and fuel cell vehicles.
  • Speeding up charging time through faster charges and an infrastructure spreading through workplaces, public chargers, homes, and multi-unit dwellings.
  • Wireless charging is also raising hopes for wide adoption of PEVs.
  • Adding more hydrogen fueling stations.
  • Seeing more diversified and attractive offerings in plug-in and fuel cell vehicle launches for both passenger and commercial vehicles.
  • Globalizing new vehicle launches for efficiency and sales growth – with variations built in by automakers based on government regulations, left- or right-side steering wheels and pedals, types of electric outlets in each country, and consumer and fleet expectations.
  • Public awareness and education programs tied to larger greenhouse gas emissions reduction targets including ride and drive events, public chargers and hydrogen stations, and powering PEVs and fuel cell vehicles through renewable energy sources.

This Week’s Top 10: The latest on zero emission credits in California, Fisker says his car will have 400 mile range

by Jon LeSage, editor and publisher, Green Auto Market

Here’s my take on the 10 most significant and interesting occurrences during the past week…….

  1. ZEVsZEV credits: The California Air Resources Board may plan this week for the state’s emissions targets to remain largely unchanged through 2025 and then jump after that year, according to three people familiar with the proceedings. This will disappoint Tesla CEO Elon Musk and environmental groups that have called for expansion of the zero emission vehicle incentives. Tesla sold 80,227 credits during the 11 months through August, which accounted for 86% of the total. And even at prices below what Musk wants, the sales helped Tesla report a profit in the third quarter after having sold $139 million worth of ZEV credits during that quarter. CARB is reassessing its targets as part of the so-called mid-term review of President Barack Obama’s fuel-economy and emissions goals for 2025.
  2. Longest range ever: Henrik Fisker is striving to earn the bragging rights on plug-in electric vehicle performance. The head of the Fisker Inc. startup on Monday claimed that the all-electric luxury sedan to be released next year, called EMotion, will be able to travel 400 miles on a single charge, reach a top speed of 161 mph, and it will come equipped with hardware allowing for fully autonomous driving. The company said it will announce its self-driving car technology supplier “soon” without providing further details.
  3. Renewable diesel: San Diego is becoming the largest fleet in the nation to use renewable diesel, with 1,125 diesel vehicles using the clean fuel, including street sweepers, refuse packers, and firetrucks. Doing so will release 80-percent fewer emissions than traditional diesel, according to state officials. That helps the city meet its goal of cutting greenhouse-gas emissions in half by 2035 under its Climate Action Plan, which was adopted in December. The city’s fleet was at first reviewing the option of converting vehicles over from diesel to compressed natural gas, but discovered renewable diesel to be cheaper and much cleaner in reducing emissions. The city doesn’t have to invest in conversion to start using the renewable diesel.
  4. Bolt production: In May, General Motors had stated the all-electric Chevy Bolt would start production in October, but then pulled the document off its website and wouldn’t comment on it anymore. There’s only been a rumor shared on Twitter so far; that source said that the production line at the Orion assembly plant has officially started. It was posted by the WaterlooRegionVoltec group of Waterloo Region, Ontario, Canada.
  5. Tesla supporters cult members: Lutz on Ex-vice chairman of General Motors and champion of the Chevy Bolt, Bob Lutz, shared another zinger on Tesla Motors and its CEO, Elon Musk. “Tesla supporters are like members of a religious cult,” Lutz said during an interview with CNBC last week. “Just like Steve Jobs was worshiped at Apple, it’s the same way with Elon Musk … seen as a new visionary god who promises this phantasmagorical future, a utopia of profitability and volume.” Watch the video to hear more.
  6. Health and climate study: The health impact of air pollution has become a widely cited source for implementing emissions reductions rules for transportation. Another study has been released tracking the damage. A new report from the American Lung Association of California states that vehicles are responsible for $37 billion in health and climate costs each year. The study tracked California, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont—the 10 states that have zero emission vehicle sales programs.
  7. Wind and solar: International Energy Agency reported that renewable energy that last year marked a turning point for renewables. Led by wind and solar, renewables represented more than half the new power capacity around the world, reaching a record 153 Gigawatt (GW), 15% more than the previous year, and surpassing coal power. Renewables are also expected to be the fastest-growing source of electricity generation over the next five years, increasing market share from 23% in 2015 to 28% in 2021.
  8. Wheego goes autonomous: Previously known as Wheego Electric Cars, the revamped company now known as Wheego Technologies no longer manufactures electric cars. It considers itself to be an R&D company, supplying its electric drive and autonomous driving systems. After starting in 2009, the company sold about 400 units through its network of dealers, but it’s been nearly three years since any have been built. The company now is focused on developing products for autonomous vehicles that use machine learning and artificial intelligence. It has two divisions with about a dozen employees each, and was recently granted a permit to test autonomous vehicles in California.
  9. Chicago electric buses: Electric bus maker Proterra just won a large contract in Chicago. JLL, a leading professional services firm specializing in real estate, announced the first commercial agreement to provide commuter shuttle services via a fleet of electric buses. The service will operate between Chicago’s commuter train stations and two of the city’s tallest buildings, the Prudential Plaza and Aon Center, both of which are managed by JLL. Proterra has leased 10 Catalyst electric shuttle buses to JLL.
  10. Flying car ride-hailing: Uber has conducted a report on what it calls Uber Elevate, which may become the name of its division providing riders with flying car trips. Along with Otto, the self-driving trucking unit, and the Pittsburgh autonomous car rides, Uber says it wants to find a manufacturer of flying cars to partner with and build an on-demand urban aviation system. Uber is talking to flying car startup makers Aero, Joby Aviation, eHang, and Terrafugia, and others about working together; though it will be several years from now until you’ll get to book a trip on your smartphone.