California’s Dreaming: It Thinks It Can Force You To Buy A Car You Don’t Want
Last Friday, the California Air Resources Board (CARB) mandated that by 2025, 15% of new cars sold in California must have zero or near-zero emissions – in other words, that they be electric, plug-in hybrid, and hydrogen vehicles such as the Nissan Leaf, the Honda FCX Clarity hydrogen car and soon the Tesla Model S.
If you think this won’t impact what you get to drive, think again. New York, Massachusetts, Washington and 11 other states have adopted California’s smog emissions rules. Those 14 states combine for half of all auto sales every year, so this is a sweeping mandate.
But mandates don’t mean people are going to buy these cars, it just means car companies will be forced into making them. Mandating behavior has often resulted in people doing things the government wasn’t expecting. Back in the mid-70′s, Americans all bought cars – SUVs and pickups were few and far between. Baby Boomers were just starting to flex their buying power. Then fuel economy standards were mandated and guess what? Consumers started gravitating towards SUVs and pickups because the cars that were being offered by automakers to meet mandated fuel economy standards didn’t meet consumers wants and needs anymore.
Do people even want these cars that CARB is mandating? The data says no.
While industry automakers cooperated with the mandate, they are still cautious. My colleague, Tiffany Groode, Director of Automotive Scenarios Advisory Service for IHS CERA (http://www.ihs.com/products/cera/index.aspx), said in a research note, “Will the stringency of this proposed standard require them to build vehicles that consumers may or may not want or be able to afford? Historically, fuel economy has not been a top consideration for U.S. consumers in choosing to buy one car over another.”
In fact, Autodata shows that hybrid sales in the last five years peaked at 2.8% and have declined for two years in a row to just 2.1% in 2011. No, I did not forget a decimal. Two-point-one percent. In other words, 97.9% of American consumers are buying a car with an internal combustion engine and fewer and fewer people are buying hybrids year after year even as manufacturers are churning out new model after new model. According to Autodata, sales of the 29 models of hybrid cars and trucks available today combined for just 275,138 units. The Nissan Altima (268,981) almost outsold ALL hybrids combined.
Americans are gravitating towards fuel efficient versions of vehicles they already want to buy and since they are changing behavior voluntarily, there are few if any unintended consequences. In 2000, traditional truck-based SUVs accounted for 17.2% of the market when the 16-MPG Ford Explorer reigned supreme with nearly 300,000 units sold. But Americans have completely changed their buying habits and now, more than one in four vehicles sold today is a crossover (car-based SUV) with the Ford Escape the best-selling model at 254,000 units. But the biggest difference is the fuel economy as automakers seek to meet the more stringent standards for 2016. The V-6 2000 Ford Explorer got a combined 16 MPG. The V-6 2012 Ford Explorer, a CUV version, gets a combined 20 MPG – a 25% improvement in fuel economy with very little compromise in utility or performance.
CARB is mandating manufacturers make even more of the kind of cars consumers aren’t buying and Generation Y is just starting to flex their buying power – and some are showing that they don’t even want cars! Let’s just hope that the unintended consequence of these aggressive targets isn’t fewer and fewer new vehicles hitting the roads, resulting in fewer and fewer American jobs.