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Toyota Chairman: Japanese Automakers Trying To Meet EU Carbon Standards

4 July 2006

Nikkei. The Japanese auto industry is “doing its best” to meet the European Union’s carbon-dioxide emissions targets for vehicles, but is hampered by vehicle safety rules and lack of subsidies and incentives to support hybrids, Fujio Cho, chairman of Toyota and chairman of the Japan Automobile Manufacturers Association, told the Nihon Keizai Shimbun.

The additional EU vehicle safety rules “have made it difficult for us to improve fuel mileage,’ said Cho. Lower fuel consumption results in lower emissions of carbon dioxide. Cho was in Brussels meeting with senior European Commission officials about environment-related issues, including European carbon-dioxide emission targets.

Regarding the seemingly slow diffusion of hybrid cars in Europe, Cho urged the EU to bolster measures to improve the popularity of the fuel-efficient vehicles, such as offering subsidies and other incentives.

“European governments haven’t come up with appropriate measures to promote the wider use of such vehicles,” Cho said.

A program of strong subsidies and incentives would be most beneficial to Toyota, which currently has the largest stable of hybrid models on the market.

Cho also acknowledged the need for Japanese carmakers to broaden their lineups of diesel-powered vehicles for sale in Europe.

July 4, 2006 in Climate Change, Europe, Hybrids, Japan, Policy | Permalink | Comments (18) | TrackBack (0)

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IMHO, the Japanese should try to get Europe to adopt California air standards. Diesel fumes suck and the sooner they get cleaned up the better.
Also, UK price is 16,612 GBP for cheapest Prius = $26,155 (after subtracting 17.5% VAT from $30,732) compared to $21,725 in USA. Why the 20% markup Toyota?

ULSD and biodiesel fumes arent that bad.

JN2 -

the UK is the only country in Europe that requires right hand drive variants. While Japan drives on the right hand side also, the safety & emissions regs plus other features are different. Therefore, anything produced for the UK market can only be sold there, so there is a greater inventory risk.

Plus, multinationals always mark up their products in overseas markets, to account for the overhead of a local seales & service organization. It also permits the repatriation of more profits. But you are right, 20% is a bit rich - especially if JANA is asking EU governments to subsidize sales. Lower prices would seem a more appropriate incentive - from a European customer's perspective, the Prius looks and feels like a car for the American market.

In any case, Europeans aren't about to ditch their diesels for gasoline hybrids. They a convenient way for local carmakers to defend their turf and politicians to "defend" local manufacturing jobs. Hybrids compete well on fuel consumption in the city but diesels beat them on the highway. In addition, diesel is also taxed less heavily in most EU countries, despite its higher energy density - a policy that does deserve to be reviewed as local refineries cannot meet diesel demand any longer.

As for emissions regs, those have been tightened rapidly since 1992. The current level, Euro 4, came into force in 2005 and Euro 5 is due in 2008 for trucks and 2010 for LDVs. Indeed, the German environment minister, Mr. Gabriel, has called for the EU to adopt US standards but so far he is a lone voice in the wilderness. In particular, NOx levels are not generally perceived to be as serious an issue as they are in say, New York or LA. Part of the reason is that Europeans tend to spend most of their relatively short summers vacationing anyhow.

However, diesel PM was a big issue last winter due to an EU imissions directive requiring cities to "do something" if levels exceed a threshold value more than 35 times in a year - which they duly did almost everywhere. The Germans, in typically thorough fashion, have devised a system of stickers indicating the EU reg level a given diesel car was certified at. On really bad PM days, these vehicles are supposed to be prohibited from driving on certain streets. It's not clear if the system will actually be applied, it reminds a lot of people of the bad old days of 1973.

Consumers immediately demanded wall-flow particulate filters or retrofit PM catalysts (which they got) plus tax deductions to help pay for them (which they got in some countries). After all, Peugeot had finally figured out how to avoid thermal runaway damage a couple of years earlier. Ironically, German carmakers had spent several years figuring out how to meet the current EU4 regs without an expensive DPF, but they all now offer one now for most new models.

Not sure it makes sense for additional incentives to buy hybrids when diesels are an option and are so popular in the European market. For that matter, I have never favored technology specific incentives even though I was rewarded for buying my Prius. Set an mpg pr a carbon per mile goal and set the incentives around that. Let the best technology win.

While they're at it, if they set a carbon goal, they should look at the well to wheel emissions not just the tank to wheel emissions. The actual differential between gas and diesel might not be as great as it seems at first blush. Not that I want to get into the can or worms about what takes more oil to produce. Been there, done that.

Surprised no one mentioned the safety regs supposed impact. Perhaps further safety regs should be considered in conjunction with an energy or co2 impact statement. In the U.S. our penchant for safety is used as a reason not to increasew CAFE standards. Can't have those big cars crushing those little cars. Of course, we're going to have big and little cars regardless, so I think the safety argument is just a smoke screen. Some of these legislators would run over their mothers with a Hummer before they would oppose the auto companies.

If we really cared about safety, we would mandate lower bumpers for SUVs and trucks. I know some of this is being done voluntarily, but it should have been mandated years ago. The fact is, neither congress nor the executive branch gave a rat's ass whether or not people were dying by having SUVs crash into the little car's back seat.

t; I couldn't agree with you more that we need to standardise bumper heights for all vehicles, including SUV's and 4x4's, and they should be retrofitted too.Here in rural N.Calif,many a young macho guy has raised their 4x4 so high that the bumper would go above any door protection, and into the upper door or window(or over the hood or rear deck!) Why the insurance companies have not cracked down on this is beyond me.

Rafael - thanks for your comprehensive answer (not to mention your valued contribution on many other threads!). It seems like getting global standards on (a) emissions and (b) safety would help everyone. IIRC, Euro V is still way off current CARB, yet alone 2008 CARB. And living in a European city, I can testify to how unpleasant diesel fumes are when 50%+ of the traffic is diesel.

I think one reason there are differing standards between areas is to keep the markets separate.
Just think if EU adopted CA standards. Then I could rather easily import any car I want from EU to USA. Right now it's very difficult and expensive for me to import a car not made for the US market.
In short, the differing standards protect the markets for the manufacturers.
Same reason there are country codes on DVDs.

Incentives are already in place in the UK. If they don't work, maybe it isn't the incentives that are broken.

The UK already taxes cars based on CO2 output and charges ridiculously inflated prices for petrol. Both of these are penalties for thristy vehicles aka incentives for economical vehicles. If a hybrid cannot be competitive in an environment that strongly favors efficiency, one might wonder if there isn't something wrong with the hybrid.

Maybe the predominantly conservative british think they are too ugly, too big, not efficient enough, too slow, too toyota, too flash, or maybe they mistrust electronics in vehicles because of experience with english electronics and their unreliability.

In any case, the problem clearly isn't a lack of incentives. Incentives are just the answer toyota would like because it is easy and would immediately help them.

I believe that the best way to promote hybrids is through car rental companies. There are many peoples curious enough to rent Prius for a two week vacation, but cautious enough not to buy it.

"If a hybrid cannot be competitive in an environment that strongly favors efficiency, one might wonder if there isn't something wrong with the hybrid."

Yes, UK gas taxes strongly favour efficient cars. Diesel's will beat petrol hybrids on 80mph motorway driving which is common in the UK, partly because of the dire public transport system and also the inflated cost of city housing.

However diesels do pollute much more than petrol hybrids and this externality is not reflected in their prices except trivially in the annual road tax. Therefore I think it would be fairer if the price of deisels is raised to reflect this and allow markets to address the problem. Perhaps one way to do this is simply to increase diesel tax and use the revenue to decrease petrol prices. This could be reversed if deisel tech became cleaner.

I do not live in the EU, but impression of the EU is that most people LIKE to drive or have road conditions that require greater driver control, thus the sales of manual transmissions are much higher than in the states where the automatic transmission is nearly in every car sold. I believe most Hybrids sold have "automatic" control of the "transmission" and that many EU buyers are turned off. Plus as stated above, the diesel engine is pretty darn good in the EU.

Bill -

most people here just don't want to pay $1000-2000 extra for a transmission that uses more (really expensive) gas and which they perceive as less responsive. The US and Japan are tow major markets where ATs are the norm - to the point where no-one has to learn how to operate a manual in order to get a driver's license. Pretty much everywhere else, traditional ATs are still the exception at the upper end of the scale (e.g. Mercedes).

That said, trnasmission technology has progressed in leaps and bounds over the past ten years. Regular ATs now come with 5-7 gears plus a bypass clutch. Small cars are increasingly fitted with robotized clutches and gear change paddles on the steering column (but no clutch pedal!). Performance compacts (e.g. VWs) are available with dual-clutch systems. And then of course, there are mechanical and electro-mechanical (Prius) CVTs.

In general, transmission OEMs are reportedly quite confident that the market share for manuals will decrease in Europe over the next decades. However, a significant marketing effort will be required to overcome antiquated prejudices. Plus, the tolerance for a premium transmission is low, especially for buyers of subcompacts and diesels. True sports car and coupe owners still prefer manuals, sports sedans and SUVs typically feature some type of AT.

Rafael:
Exactly, so do you think that the negative preception of an automatic transmission hurting hybrid sales?

Rafael:
Totally agree with your analysis. Hydraulic torque converter used on traditional automatics does multiply torque and does not require step-off from gas pedal during shifting, but downshift requires some time (which is frustrating when you want to accelerate from the cruise) and certainly wastes some energy. Dual clutch mechanical and ultimately Infinite Variably Electromechanical (Prius-like) are the best of both worlds. I believe that share of traditional AT will decrease in US and Japan too.
Parallel could be made with photo cameras. First exposure automatics were perceived as “inflexible”, but eventually all modern cameras – film or digital – are automatic, with universal feature to customize automatics or totally override it and take pictures in manual mode.

Bill -

no, I don't think the fact that the Prius has a special type of automatic transmission is a major factor in the relatively modest enthusiasm for gasoline hybrid technology in Europe. Here are a few reasons I believe are more important:

(a) it's not being championed by any of the local carmakers. If anything, they have used their influence with the local trade rags to ensure the hybrid concept is perceived critically (until they have models of their own to offer) or preferably, not at all. The gist is that yes, hybrids do save fuel in city driving but not much on the highway. Damned by faint praise, if you will. There is also no government agency (cp. California ARB) that is forcing carmakers to push hybrids. On top of that, European consumers are generally slower to adopt new technology than gadget-loving Americans are.

(b) diesels are very popular here and deliver the same or better fuel economy as a gasoline hybrid, at a lower price - bear in mind that diesel enjoys a tax advantage over gasoline in many European countries. Ironically, microcars and sports cars aside, gasoline engines are perceived as the inferior choice in some countries. Europeans do want low emissions but they do not usually want to pay through the nose at the pump for them - nobody wants to give the next guy a free ride. Cp. demands for tax relief on DPFs.

(c) the styling and handling of the Prius (the car many Europeans equate with the hybrid concept) is perceived as foreign. The issue is not that it's Japanese but rather, that it doesn't quite conform to European aesthetic sensibilities wrt cars. On the other hand, that distinctiveness is precisely what makes the Prius instantly recognizable and those who know what a hybrid is do give it the thumbs up. They just wouldn't neccessarily buy one themselves.

Well, for the LHD version of the Prius (to go back to that point), the Base price excluding VAT is around 22000 EUR - and this in all countries on the continent.

Thats a whopping 28000 USD - excluding, btw, the better emission control systems all NA Prius (CHSS) get.

So, the Prius is not only sold for a 25% premium here in Europe, it's also cheaper to manufacture for Toyota.


Apart from that, it's also true that diesel fuel is heavily subsidized - ie. the per-volume taxes and fees are lower than for gasoline, while at the same time the energy content per volume is about 12-15% higher.

Also, one could see the significantly less strict emission regulations for diesel cars as another support by regulators to favor diesel cars unfairly nowadays.

Even so, modern diesels which would fulfull CA or EPA Tier 2 emissions standards, are no longer more fuel efficient than gasoline cars, as the aftertreatment of their exhaust eats up all the higher efficiencies in the engine.

On top of that, manufacturing a diesel engine (even without all the exotic equipment to make it compliant with US regulations) is more costly than a clean gasoline engine, due to the many auxilliary systems requires (exhaust gas recirculation, High-pressure injection pump, turbocharger, ...).

On a level playing field, where not only efficiency (GHG emissions), but also smog emissions count, diesel don"t really stand a chance for the broad market, not economical nor ecological.

Now guess the percentage of new diesel cars in switzerland (where basically only the fuel is taxed the same as gasoline - not even more due to the higher energy content), versus austria, where diesel cars are exempted from a number of taxes, and diesel fuel also has a very low tax toll...

(<10% vs. >80%)

If all the standards were the same it seems that prices would be lower as it would lower manufacturing costs of cars. Also, every car should have the same bumber heights as it would help in crashes. Air bags and door protection should also be mandatory to keep cars safe. http://buildsitepro.com/home.asp

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