Editor's note: Green Car Reports covers a lot of electric cars—and there are a lot more to cover these days, thanks to California's complex requirements that major automakers produce zero emissions vehicles for sale. For fans of clean cars—as well as opponents—it's difficult to understand how many plug-in cars the state requires due to a complicated system of credits. This directly impacts the selection of models available. In this report John Briggs breaks down how the system works by turning it into a high-stakes card game, complete with chips and a banker.
Please note that the numbers in this story are approximate, because California uses its own tests to determine electric vehicle range, which directly affects the number of credit points manufacturers earn. Since these test results are not made public, we have used a conversion factor to approximate the points based on each car's EPA-estimated range. We have done the same with sales numbers, which are not broken out publicly for California.
While we understand that the numbers are not exact, we believe that they are directionally correct and provide a valid basis for comparison among manufacturers (much like the EPA's own fuel economy ratings).
Playing by the rules in California's ZEV Zero Emission Vehicle Game
Ever attended an adult board game night and found yourself playing a game with far too many rules?
The California Air Resources Board’s (CARB) Zero Emissions Vehicle (ZEV) mandate seems to be such a game. A complex set of rules require auto manufacturers to produce vehicles without tailpipe emissions.
Auto manufacturers that sell more than 20,000 vehicles per year in California and have annual global revenue more than $20 billion must play this game, and are known as Large Volume Manufacturers. Sales are calculated as a three-year moving average for five years. Did I mention the rules are complicated?
In 2016, the last year reported by CARB, six automakers were determined to be Large Volume Manufacturers (LVM): Fiat Chrysler, Ford, GM, Honda, Nissan, and Toyota. (BMW, Hyundai, Kia, Jaguar Land Rover, Mazda, Mercedes, Subaru, and VW may join them in 2018 by crossing those sales thresholds.)
Imagine the six manufacturers are playing a little game. (Figure 1, top.) Each has played different cards generally of two types. In black are TZEVs (Transitional Zero Emissions Vehicles) which is CARB-speak for Plug-in Hybrid Electric Vehicles (PHEV). In red are the ZEVs (Zero Emission Vehicles) which are either battery electric or hydrogen-powered fuel-cell vehicles.
But which is the winning hand?
Before you answer, it is worth knowing more about the rules of this complicated game.
The value of cars
Not all cards (cars), have the same value. The ZEV credits increase with a vehicle’s all electric range (AER). Credits equal 0.01*AER+0.5. Each vehicle gets 0.5 credit plus 1.0 more credit for each additional 100 miles of range.
Plug-in hybrids have ranges of between 10 and 80 miles, or according to the game scoring, 0.6 to 1.3 credits. For ZEVs, which are battery-electric or hydrogen fuel-cell vehicles, the range is between 50 and 350 miles (1 to 4 credits).
CARB ZEV vehicle game 2018 point value of chips based on electric range
A typical plug-in electric hybrid like the Prius Prime with 25 miles of range would get 0.9 credits, but the more capable Chevy Volt with 53 miles of range would net 1.3 credits. (Figure 2, above.)
A longer-range ZEV, such as the Chevy Bolt EV, will get 3.9 credits, and the 312-mile Toyota Mirai; 4.0 credits.
One might like to debate with CARB whether or not the Toyota Mirai really delivers three times the environmental benefit of the Chevy Volt, but who are we to argue with the creators of the game?
(Note: CARB uses the UDDS Test cycle to determine the vehicles' all-electric range but doesn't publicize the results. The EPA all-electric range is multiplied by about 1.4 to get the all-electric range used by CARB.)
Automakers who have figured out the rules are pulling ahead of others in the score.
CARB ZEV vehicle game 2018 Chip requirements ramp up
Higher levels of play
The ZEV game gives credits for both PHEVs and ZEVs, but another rule makes the game even more challenging: For 2018, Large Vehicle Manufacturers need to generate a credit percentage of 4.5. In other words, they need to have 4.5 credits for every 100 vehicles they sell in the state.
At least 2 of those credits per 100 vehicles must come from zero emission vehicles, as illustrated by the piles of chips. (Figure 3, above.) This requires that every Large Vehicle Manufacturer must sell some form of zero emission vehicle and not just plug-in hybrid models. Most manufacturers already make some form of pure battery electric vehicle, but in Toyota’s case their ZEV of choice is the hydrogen fuel-cell Mirai.
By 2025, automakers will need 22 credits for every 100 vehicles they sell, with most of those from ZEVs, not from plug-in hybrids.
The rules say that the more cars you sell in California, the more points you need. Based on 2016 sales numbers, Toyota will need more points than Nissan and Fiat Chrysler combined. (Figure 4, below.)
CARB ZEV vehicle game, 2016 electric car sales in California
Each month, Green Car Reports publishes the number of plug-in sales from each manufacturer, which tends to look like a horse race. It is important to realize, though, that this game counts only sales in California and other states that follow its rules. Under this scenario, Toyota will need more than twice as many credits as Nissan to meet the ZEV requirements. Also, the sale of a Chevy Bolt EV is worth 4 points, but sale of its stablemate Volt plug-in hybrid is only worth 1.3 points, making each Bolt EV sale far more important than a Volt sale.
2017 results, so far
So how are the top six large vehicle manufacturers’ strategies paying off? One way to get a quick feel for this is to look at the 2017 plug-in sales numbers. The numbers for just California are not readily available, so we’ll have to substitute national numbers as a general indication of how the players are performing. The number of vehicles sold are multiplied by the vehicle credit value and added together for each large vehicle manufacturer. (Figure 5, below.)
CARB ZEV vehicle game score based on 2017 sales
GM is leading with a theoretical 116,674 points, mostly due to over 90,000 points from Bolt EV sales.
To realize how massive this is, consider the goal of 4.5 credit percent that GM needs to reach in California in 2018. For GM’s 208,319 vehicles (sold in 2016) times 4.5 credit percent means they only need 9,374 points for 2018. So GM is way ahead of the ZEV game in 2017.
One of the seemingly weaker players in the ZEV game is Fiat Chrysler. The only ZEV they sell is the small Fiat 500e, which earns only 1.7 credits because of its limited 80-mile range. But Fiat Chrysler is actually winning the game based on banking.
The automakers each get savings accounts with the game’s banker, CARB. The credits they keep in the bank can be kept or sold to other players. Players can also purchase credits from other carmakers such as Tesla.
CARB ZEV vehicle game points in the bank, final 2016 score
Fiat Chrysler had banked over 90,000 ZEV credits as of 2016. (Figure 6, above.) Those credits could carry FCA until 2023.
Honda is in the weakest shape with only 24,422 banked ZEV credits, which is compounded by some of the weakest plug-in car sales of any large volume manufacturer.
Winners in this game need a serious strategy for selling zero-emission vehicles (hydrogen fuel cells or long-range battery-electrics) to stay in the game ahead of the rapidly rising ZEV mandates.
Buying credits can delay this, but as the requirements rise, manufacturing ZEVs will likely be a necessity for every large automaker.