A Clean Air Detour?

Major auto makers are gearing up their U.S. publicity machines for the onslaught of the hybrids: passenger cars and trucks that combine gasoline or diesel engines with electric motors to provide unheard-of fuel economy and low emissions in a package that also offers decent performance.

Honda Motor Co. and Toyota Motor Corp. have already introduced production-model hybrids, and the domestic auto makers plan to follow suit in the next four years. It’s all part of the greening of the auto industry.

But even as they help ease the harmful automotive effects on the air we breathe, the new hybrids may pose a threat to California’s tough requirement that at least 4% of the major auto companies’ passenger vehicles in the state meet zero-emissions standards starting with the 2003 models.

The politicking hasn’t begun in earnest yet, but auto makers are expected to point to their hybrids as a show of good faith when they start lobbying the California Air Resources Board to once again modify or delay implementing the zero-emissions vehicle, or ZEV, regulations first adopted in 1996.

“It’s going to be a big slugfest at this next ARB round,” said John DeCicco, transportation director for the American Council for an Energy-Efficient Economy. The Air Resources Board reviews its emissions rules every two years, with the next review scheduled for September.

“It is pretty clear to me that car companies, especially Honda and Toyota, seem to be using the hybrid strategy to undermine the ZEV mandate,” said DeCicco, coauthor of the energy council’s annual “green guide” to cars and trucks.

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The environmental community isn’t pleased at that prospect.

The Sierra Club, which last month gave Honda’s two-seat Insight hybrid the first product endorsement in the group’s 108-year history, says it will vigorously oppose any effort by auto makers to delay the ZEV regulations.

“The ZEV rules are at risk,” said Carl Pope, the Sierra Club’s executive director, “but we believe the auto makers can and should meet the mandate.”

The regulations require auto makers that sell more than 35,000 passenger cars and light trucks a year in California to provide their dealers here with a combination of zero emissions and specially certified super-ultra-low-emissions vehicles equaling 10% of their total annual vehicle sales.

Companies covered by the ZEV rules are the domestic Big Three (Ford Motor Co., General Motors Corp. and DaimlerChrysler’s U.S. operations) and the Japanese Big Four (Toyota, Honda, Nissan Motor Co. and Mazda Motor Corp.). All but Ford-controlled Mazda are actively developing hybrid-powered vehicles, although Nissan’s work is being done in Japan on a car not built for the U.S.

SULEVs--super-ultra-low-emissions cars and trucks with zero evaporative emissions, a standard that so far only Nissan has achieved--can account for up to six of every 10 vehicles in the mix. But those with true zero-emissions ratings--ZEVs--must account for the rest: at least 4% of the auto makers’ total California fleets.

For a company like Ford, which led the California market by selling 380,000 passenger cars and trucks last year through its various brands, that’s more than 15,000 ZEVs. For Honda it’s about 8,000.

And for all seven of the manufacturers now covered by the rule, it is too many. In the three years that electrics have been marketed in California, only about 2,000 have been sold or leased.

“The way I read it is that the regulators already realize it is not realistic to expect 10% of the cars in the state to be SULEVs and ZEVs,” said Thad Malesh, who heads alternative-fuels consulting for J.D. Power & Associates. “I don’t think manufacturers will have to lobby a great deal.”

Malesh believes that the Air Resources Board will “lower the ZEV requirement, perhaps push it off until 2005, and increase the requirement for SULEVs.”

Rich Varenchik, an ARB spokesman, said auto makers have not begun campaigning for a change and that “no one here is talking about making one at this point.”

The main issue is that the only ZEVs now available for retail sales or leases are battery-powered vehicles such as GM’s two-seat EV1. And auto makers, as well as some green-car enthusiasts, generally agree that these vehicles don’t have mass public appeal because of their limited range and initial high costs. Few will travel more than 100 miles before a six- to eight-hour recharge is needed. And leases, even though they usually include factory-paid maintenance, average $450 a month.

GM has said repeatedly in recent weeks that it intends to continue building the EV1 as public demand dictates, but Honda announced last year that it would stop building its four-seat EV Plus electric car after completing the 300 units it had promised state regulators.

Officials at Torrance-based American Honda Motor Co. cited poor public reception as the reason they pulled the plug, saying that although Honda could continue to provide the vehicles to state agencies and public utilities that were required by law to use them, there was no public appetite for the car.

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Hybrids, however, are seen as vehicles that can be readily marketed: They do not require recharging, and they go much farther on a tank of fuel--up to 700 miles for the Honda Insight--than conventionally powered vehicles.

“Of course they will use hybrids to try to get the state to let up on the ZEV rule,” said Ron Cogan, editor of Green Car Journal, a San Luis Obispo-based newsletter that tracks the efforts of auto makers and independent researchers to develop environmentally friendly vehicles. “There’s going to be heavy lobbying on all sides.”

Cogan, who says the manufacturers are correct in their claim that battery-powered electric vehicles have limited market appeal, nevertheless believes the state will hold the line on ZEVs to some degree.

“The ARB in California would be hard-pressed to eliminate all requirements for ZEVs,” he said. “The mandate has driven a lot of research and development and is responsible for the kinds of alternate vehicles we now have, so a lot of folks think it’s important to keep the fires burning.”

And allowing the auto makers to replace ZEVs with hybrids could be dangerous, Cogan warns.

“If we rely on hybrids, it could slow down development of fuel-cell cars,” he said, referring to the next generation of electric vehicles that won’t need storage batteries and will deliver performance and range that compete with vehicles powered by conventional internal-combustion engines.

Honda is already selling its gas-electric Insight, which gets 70 miles per gallon. Toyota will follow this summer with its five-seat Prius, which will arrive in the U.S. market with a fuel rating of about 60 mpg around town. Other major manufacturers plan to enter the hybrid market within two years.

“We’ve been quite open in saying that, even at 4%, the ZEV requirement is quite large and perhaps unobtainable,” Toyota executive Mark Amstock said in a recent interview.

“The retail consumer doesn’t want to pay more to get less”--which is the case with the present generation of electrics, said Amstock, the company’s Prius program marketing manager.

“The goal is clean air in California. . . . But we can impact air quality much greater and much quicker with market-driven products” such as hybrids, SULEV gas engines and, ultimately, fuel-cell-powered electrics, Amstock said. “The hybrid is awfully clean, and it doesn’t compromise retail customers’ expectations. It is a viable way to [help] obtain clean air in California, and it can be packaged in appealing combinations.”

DaimlerChrysler’s Dodge division has even said that it can produce a hybrid four-wheel-drive Durango sport-utility vehicle by 2003--SUVs are among the most popular types of vehicles in the market these days--and sell it at the same price as a conventional model if the federal government or individual states would approve a $3,000 tax credit for hybrid buyers.

Indeed, while they do so in various keys, some at much softer volume than others, all of the auto makers affected by California’s zero-emissions rule sing the same song these days: The ZEV rule imposes too much too soon and does not take into account the realities of the marketplace.

By 2004, Ford, GM and DaimlerChrysler are all expected to be fielding hybrids of their own. They are working on conventional passenger cars that get up to 80 mpg and score well in the low-emissions race.

Honda has already received an ultra-low-emissions rating in California for its Insight, and the company is working on an evaporative emissions system that could kick its hybrid into the SULEV category soon. Toyota officials say they believe that the Prius will be rated as a SULEV.

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The auto makers hope to use their hybrids, the relative handful of battery-powered electric cars and trucks now registered in the state, and new conventional vehicles powered by the revolutionary SULEV gasoline engines developed by Honda and Nissan, to persuade California’s air-quality regulators to delay imposition of the ZEV rules at least until 2005.

That’s when electric vehicles powered by on-board fuel cells are expected to begin trickling into the retail market. The fuel-cell system replaces storage batteries by producing electricity from hydrogen in an electrochemical process that takes place aboard the vehicle. The range of a fuel-cell-powered electric car or truck is limited only by the availability of hydrogen--which can be delivered already distilled or can be distilled on board the vehicle from other fuels, such as methanol.

DaimlerChrysler and Ford have partnered with a Canadian company, Ballard Power Systems Inc., in a $1-billion campaign to develop a commercially viable fuel-cell system for passenger vehicles. Ballard, based in Vancouver, recently said that it could begin producing one as early as 2004; Ford has committed itself to introducing a fuel-cell test program in California that year.

GM and Toyota are partners in a similar joint development effort, and other major auto makers, among them Nissan, Honda and Mazda, are working on fuel-cell projects of their own--often using Ballard systems as the core.

But most in the industry believe that widespread production of fuel-cell vehicles is at least a decade away: Even if the vehicles could be produced at a price consumers will pay, a fuel-delivery system would have to be developed to make them truly competitive.

Meanwhile, a hybrid system such as Honda’s Insight means that “you don’t need a new fuel-delivery infrastructure, and people don’t need to change their habits, except to go to the service station less often,” said Robert Bienenfeld, manager of alternative-fuel vehicle sales and marketing at American Honda. Hybrids, he said, “give longer legs to the gasoline infrastructure and help extend the life span of the petroleum engine.”

All that is true, concedes Sierra Club Executive Director Pope.

But it doesn’t make a compelling case for postponing California’s ZEV rules, he said.

“Car companies have always used any sort of technical advance they make to argue against making more. But Steve Jobs doesn’t stand up and announce a great new product and then say that ‘as a result, you can forget about all the even better products we talked about last year,’ ” Pope quipped, referring to the Apple Computer chief executive. “That might possibly explain the performance difference between automotive and high-tech stocks.”