Pub. 16 2017-2018 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 4 , 2 0 1 7 26 new jersey auto retailer T he 2018 zero-emission vehicle (ZEV) requirements might mean big changes for dealerships in New Jersey – but then again, they might not. The ZEV rule, which requires OEMs to make up an increasing percentage of their overall sales with electric, plug-in-hybrid, or fuel-cell vehicles between 2018 and 2025, contains a number of flexibilities intended to ease the regulatory burden on manufac- turers, allowing each one to tailor a compliance plan that fits best with its overall business strategy. While helpful to carmakers, these flexibilities also make it difficult to pinpoint the number of ZEVs that will be delivered for sale in New Jersey or any other ZEV Program state outside California. This article will attempt to de-mystify the process that state reg- ulators use to determine compliance, which will hopefully shed some light on the choices that each manufacturer will face, and the resulting span of possible deployment numbers here in New Jersey. The number of ZEVs that a manufacturer is required to sell in each ZEV Program state is based upon that manufacturer’s total annual sales in that state. But because manufacturers can use credits earned and “banked” fromprevious years, and because they can also purchase credits from other companies, the number of actual cars they’ll need to sell in a given year could be as little as zero. CARB has calculated that, on average, manufacturers could continue to sell ZEVs at current levels through 2021, meet- ing the additional requirements simply by spending down their banked credits. It’s also important to remember that the requirements are defined in terms of credits, not cars. All battery-electric vehicles (BEVs) and many plug-in hybrid-electric vehicles (PHEVs) will get more than one credit per car: they can earn between 0.5 and 4 credits apiece, based on the total miles that can be driven on a single charge. This means, for example, that General Motors would need to sell more than three times as many Volts (1.3 credits each) as Bolts (4 credits each) to earn the same number of ZEV credits. It also means that each manufacturer’s sales share requirement can’t be calculated without knowing exactly which mix of vehicles (and specifically, how far each model can go without the engine turning on) will be used for compliance. As if those factors don’t make it hard enough to project an actual number of ZEVs to be delivered for sale in the state, there is one more: Most manufacturers are expected to take advantage of a provision in the rule that allows them to trade not just with other credit holders within the state; but also to trade credits from their bank in one state to their banks in any other ZEV Program state (except California), a process known as “pooling”. While this sounds technical, it can have a major impact on manufacturers’ sales plans and targets. A carmaker could choose, for example, to sell more ZEVs than required in New York, and then transfer the extra credits earned from those sales to its “bank” in New Jersey, in lieu of sales. There is no limit to how much of the requirement can be met this way. How will this work in practice? Manufacturers have wide latitude to focus on those markets within the “pool” that work best for them and their dealers. It will be up to each individual OEM to decide whether to sell extra ZEVs – and thus earn extra credits – in New Jersey, or to sell fewer ZEVs here and use credits from another state in the pool to comply with New Jersey requirements. That said, based on our experience working with states and automakers to Understanding Clean Car BY MATT SOLOMON