## California ARB considering modifications to ZEV regs to provide more flexibility for intermediate volume manufacturers

##### 03 September 2014

The California Air Resources Board (ARB) will conduct a public hearing on 23 October to consider amendments to the Zero Emission Vehicle (ZEV) regulation that would modify the requirements for intermediate volume manufacturers (IVMs) selling into the state to allow them more time to come into the advanced technology vehicle market.

The modifications to the ZEV rule, developed by the ARB staff to be presented to the Board at the meeting, provide additional compliance flexibility to the IVMs by providing additional production lead time; a reduced compliance obligation; an opportunity to pool compliance obligations in ZEV states; and additional time to make up ZEV credit deficits.

Background. As part of the 2012 Advanced Clean Car (ACC) rulemaking (earlier post), which included the ZEV regulations, ARB changed the definition of an IVM. The ZEV Regulation previously defined an IVM as any manufacturer with California sales between 4,501 and 60,000 new light- and medium-duty vehicles. The 2012 amendments reduced the California sales upper bound to 20,000 vehicles per year beginning with the 2018 model year.

The amendments concurrently changed the IVMs’ ZEV obligations from being able to meet the mandate with super clean conventional partial zero emission vehicles (PZEV) to transitional ZEVs (TZEVs or plug in hybrids). At the hearing for the 2012 amendments, the Board directed staff to review how the regulation affects IVMs transitioning into large volume manufacturer (LVM) requirements in the 2018 model year and to return to the Board by 31 December 2014, with a recommendation regarding more fair treatment of these manufacturers, ensuring all manufacturers are successful in commercializing ZEV technologies.

In October 2013, ARB staff proposed minor modifications to the ZEV Regulation. Those modifications included clarifying the Section 177 state optional compliance path provision; defining how caps apply to a manufacturer’s ZEV requirement; and excluding battery swapping as a “fast refueling” technology.

At that Board Hearing, five IVMs—Jaguar Land Rover, Mazda, Mitsubishi, Subaru, and Volvo—presented their proposal for changes to the ZEV regulation that would provide them with adjustments they felt necessary to allow them time to come into the advanced technology vehicle market. Their proposed changes included:

• very small demonstration quantities of ZEVs through 2025;

• large credit multipliers for any ZEVs produced;

• travel and pooling of both ZEV and TZEV credits in ZEV states;

• extended service credits for cars offered for sale or extended leases; and

• three years to make up ZEV credit deficits.

ARB staff continued to work with the IVMs.

The most significant difference between the position of IVMs and LVMs regards the amount of revenue available to IVMs for research and development (R&D). The IVM5s’ global revenue is approximately one-quarter to one-third that of those IVMs who are transitioning to LVM requirements based on California sales. It is an even smaller proportion of the revenues of current LVMs. Revenue constraints limit an IVM’s ability to: (1) commit to the same level of R&D as an LVM, and (2) market ZEV products. In recognition of these revenue constraints, the ZEV Regulation was crafted to allow IVMs to meet their pre-2018 model year ZEV obligations solely with PZEVs. The PZEV provisions were intended to ease the burden on IVMs in comparison to LVMs since PZEVs are much easier to market, as compared to the ZEVs required under the ACC provisions for LVMs.

The ZEV Regulation then requires the IVMs, in 2018 and subsequent model years, to begin delivering ZEVs. However, again in recognition of the lesser R&D capabilities of IVMs in comparison with LVMs, the ZEV Regulation allows an IVM to meet its entire ZEV obligation with TZEVs. The TZEV provisions were intended to ease the burden on IVMs in comparison to LVMs but in effect, they make it extremely difficult for an IVM to meet its ZEV percentage requirements. For example, a typical LVM can meet its 2025 ZEV obligation with a combination of ZEVs and TZEVs representing approximately 22 percent of its sales. For an IVM to meet its 2025 ZEV obligation with TZEVs, the TZEVs would need to represent greater than 40 percent of its total product sales. An IVM with sufficient revenue could offer both a ZEV and a TZEV model to decrease the percent of sales that would have to be met with advanced technology vehicles, but being that each of the IVM5 automakers offers only 3 to 4 passenger car models that means a greater percentage of their vehicle offerings would have to be higher-cost advanced technology models (in contrast LVM automakers offer, on average, 12 passenger car models). In other words, under the existing regulation the IVMs’ ZEV models needed to comply with the ZEV Regulation would constitute a greater proportion of the IVM’s total model offerings.

—ARB Staff Initial Statement of Reasons (ISOR)

Based on this and other differences, staff determined that it was appropriate to introduce changes that improve competitiveness and provide IVMs the flexibility needed to successfully commercialize ZEV technologies.

The proposed modifications to the ZEV Regulation have the potential to reduce California ZEV deliveries by less than two percent in the 2018 through 2025 timeframe, ARB staff noted in its ISOR. However, ARB does not anticipate any loss in emissions reductions because other ARB regulations would prevent backsliding. For example, vehicles produced for the ZEV regulation are counted in the LEV III criteria and GHG fleet average standards. Any loss of emissions reductions resulting from changes to the ZEV Regulation are required to be made up through increased emission reductions from the LEV III fleet.

The proposed amendments modify seven components of the ZEV Regulation and:

1. Establish a global revenue test, in addition to the existing California sales threshold, for IVMs transitioning to LVM status. Staff is proposing a global revenue threshold of 40 billion, calculated from the average of the three consecutive fiscal years immediately preceding the determination. The global revenue test is only available to IVMs for the 2018 through 2020 model years. Beginning in the 2021 model year, a manufacturer exceeding the 20,000 vehicle threshold will need to prepare to bring ZEVs to market per the LVM requirements; the ARB expects most IVMs will make ZEVs available for sale by the 2026 model year. 2. Provide IVMs transitioning to LVM status additional time before having to deliver advanced technology vehicles. Staff is proposing to extend the lead time to 5 three-year averages commencing once the first three-year average exceeds 20,000 vehicles. This provides IVMs a minimum of 5 years and a maximum of 7 years to bring a vehicle to market. This lead time is similar to the lead time provisions established for IVMs that transitioned to LVM status prior to 2018 in ZEV regulation versions prior to the 2012 amendments. 3. Decrease the ZEV credit percentage requirement for IVMs so that their advanced technology vehicle deliveries, as a percentage of sales, are similar to that of LVMs. ARB staff is proposing to adjust downward the total ZEV credit obligation for IVMs in the 2018 through 2025 model years. Specifically, the proposed obligation would be set at a credit level equivalent to the entire LVM optional (maximum) TZEV obligation plus one-fifth of the LVM pure ZEV obligation. This results in an IVM having an advanced technology vehicle sales percentage (based on a likely compliance scenario) more closely aligned to that of the LVMs. 4. Provide IVMs the ability to pool ZEV compliance in Section 177 states. 5. Adjust the ZEV credit deficit provisions to provide manufacturers three years to make up the deficit. 6. Clarify the fast refueling definition; and, 7. Correct grammatical errors. Resources ### Comments Here's an idea, Get rid of CARB and let the EPA handle regulatory matters that by their very nature, should be handled on a national level (vehicles, engines, etc). CARB is just a tool of extremist environmentalists to terrorize industry. If our glorious leader (obama) really wanted to "save the auto industry" like he always claims, he would have nixed CARB and instead, allowed the EPA to run the regulatory environment. Love it or hate it, the EPA does have a slight bit of oversight, whereas CARB is the definition of "the inmates running the asylum." But who am I kidding.... just wishful thinking.... what happened to "states rights' so dear to the right? Aren't you gentlemen usually whining about the federal government telling god fearing, gun owning, coal and oil burning citizens what to do? John, I was a registered democrat who has recently switched parties, so please spare me the mindless political pandering. As an engineer and a civic minded American, I find it imperative to be a reasonable, technically minded person with regards to environmental regulation, while respecting states' rights. In my humble opinion, industries that are national or international in nature, should be regulated from a high-level (i.e. the EPA). Industries/activities that are local should be regulated by local authorities. Engine, automobile, aircraft, boat, etc manufacturers would fall into the realm of national (EPA) jurisdiction. Things such as backyard trashburing, local wastewater treatment, local powerplants, etc would fall into the jurisdiction of local (state) govt. Please check your political biases at the door. Insulting honest, hardworking people who are conservatives is not appreciated. "CARB is just a tool of extremist environmentalists to terrorize industry." Yeah, that is really checking your political bias at the door, start walking the talk. SJC, I work in an industry that is 100% chained to CARB. It is a horrible mess. I have spent the better part of 7 years working on emissions monitors that are completely made up and nonsense, but must be satisfied due to CARB. After working for these years in this industry, I have changed my political party affiliation from (D) to (R). Obviously I cannot reveal too much, my company reads these sites and I would be fired for anything that contradicts the official party line. CARB serves no purpose whatsoever, if you read documents from NRDC, Sierra Club, GreenPeace, etc, you will see that they very often include the preservation of CARB as one of their top requests. You maybe did not read my entire previous comment, that the EPA should be in charge, not CARB. The idea isnt to gut necessary regulations, it is to give regulatory authority of national/international industries to national regulatory agencies. My previous comment did not mention anything about politics.... just FYI "CARB is just a tool of extremist environmentalists to terrorize industry." "Please check your political biases at the door." Follow your own advice, what your supposed credentials are mean nothing to me. This site is about "sustainable mobility", not bashing CARB. Laughed out loud, SJC, thanks for the levity. O Tolmon, may I respectfully suggest you take a look at the map, prepared by the EPA, referenced in this GCC story: http://www.greencarcongress.com/2014/08/20140831-epa.html Even a casual perusal will show that California has some requirements very specific to its geography, population and transportation infrastructure. Other stories, also published here on GCC, reveal that 44,000 Californians died prematurely - on average 14 years early, because of sub-standard air quality. That's more people who died in auto accidents during the same period. As a Californian who breathes the exhaust of the 13 million cars on the road here, I'd really like to see CARB get a little more serious about standards and enforcement, rather than ease them, as they will consider at the referenced hearing, which I will attend. SJC: This site is about many auto-related things. No where on the bylaws of this site are honest (industry) opinions banned. Electric-Car-Insider: You should schedule a visit to an OEM and see how few pollutants are emitted from a new gasoline/diesel vehicle. Until you can say you've done that, then I will just shelve your comments..... Where I work, tailpipe emission regs are king,and there's no funny-business around it.... O Tolmon, I was an automotive technician for many year before I got into software development. I have done plenty of emissions tests personally. I can also read and comprehend reports on emissions pretty well. Vehicle emissions comprise the largest category, about 40%, of air pollution. All this is academic though. I live in Southern California and Seattle. In SC I can just look out the window toward the ocean and see a really nice thick brown haze. That's the product you're putting out, tailpipe king. You're right, it's not too funny. electric-car-insider, Funny, we appear to be flip-flopped, where my first love and education was electrical engineering and then I end up dealing with engines and emissions.... I am not sure about the OEM or company you worked for, but where I am, there is no cheating and the tailpipe emissions of our vehicles vastly meet and exceed regulatory levels, regardless of how overly-zealous the regulations are. On another note, I visited your website, you should keep it more current, it really has a great setup. (constructive advice, seriously, it is a good site and there aren't enough EV/HEV sites out there) Thank you O Tolmon. I believe the OEMs operate in good faith. Air quality in the US is improving from the levels of a few decades ago. Unfortunately, even at fairly low levels per vehicle, the accumulation of vehicle emissions still presents serious health risks as many studies linked to from this site demonstrate. I believe zero emissions vehicles represent the most exciting development in automotive history. Bob Lutz summed it up pretty well: "General Motors is dedicated to the removal of cars and trucks from the environmental equation, period." Tesla has demonstrated conclusively that driving electric does not have to be boring, or limiting. Who doesn't want to pay the equivalent of1 per gallon, and drive a silky smooth, zero vibration, virtually silent car?

In my younger days, I used to restore and drive exotics and other "fun" cars. In my humble opinion, the electric experience is far better by every measure. No way I'll ever buy another ICE.

ECI,

I honestly could care less about whether a car is gas/diesel powered, especially in this day of super clean burning engines..... however...

G**DAMN... the only profitable electric car (Tesla Model S) is just incredible. I'd kill to have one minus the whole $100,000 price..... (yes the base price is much lower, but go price one out to see the real price).... My mistake, I wouldn't "kill" for anything.... just a figure of speech.. Well the good news is that you, and 500,000 other people, will be able to buy one for$35k in 2017. And there's absolutely no reason that every other OEM on the planet can't also deliver a 200 mile silky smooth EV around the same time.

Let's hope they have a good answer to Tesla by then.

Yes but I want a torque monster (besides a diesel) for a great price... (cake and eat it too)...

@OTN,

Be patient. by 2020 or so, that dream EV will be available at a relative affordable price.

Ultra quick public chargers will also become a common place reality.

Of course, low cost private slow chargers will multiply at an equivalent rate.

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