When Mazda Motor Corp. launches its first all-electric car this month at the Tokyo Motor Show, it won’t come a day too soon for the automaker’s bottom line. Mazda is one of those companies that’s taking a bath around the world for not being electrified enough to satisfy government regulations.
In Canada alone, Mazda expects to cut a cheque this December to the Quebec government for more than $4.5-million as a penalty for not selling any electrified vehicles in the province. Quebec’s Bill 104, passed in 2016, states that automakers who want to avoid expensive fines must sell a minimum percentage of their vehicles with electrified powertrains, and that percentage will increase each year until 2025.
It’s a complicated accounting system, but suffice to say that a full battery-powered electric car is worth one credit, and a plug-in hybrid is worth half a credit. For model year 2018, manufacturers had to sell enough low- and zero-emission vehicles to add up to at least 3.5 per cent of their total fleet sales. For model year 2019, that rises to 6 per cent, then 12 per cent in 2021 and finally 22 per cent in 2025.
Mazda sold a few more than 25,000 vehicles in Quebec in 2018, which means at least 875 of them (3.5 per cent) would need to be fully electrified to satisfy the provincial government. But Mazda doesn’t make any electrified vehicles – it’s been concentrating on improving its gas-powered engines, which are among the most efficient in the industry. So each of those 875 vehicles is liable to a $5,000 penalty.
Next year, assuming similar sales, Mazda expects to write a cheque to Quebec for $7.8-million, and the following year, for $12-million, just in penalties. If that battery-powered car is late to the showrooms, it will cost $15-million in 2021.
And this is just Mazda, and just Quebec. Subaru is in a similar situation. It has announced a partnership with Toyota Motor Corp. to develop a new electrified platform and a compact electric SUV, but it’ll take a while. Subaru’s Canadian sales are about three-quarters of Mazda’s, so its penalties will be pro-rated as such.
The story is similar in a number of other countries, notably in Europe and in the United States, where California leads 10 other states in demanding automakers pay fines for non-electrification and poor emissions control. So far, Quebec is the only province with such penalties in place.
Of course, there are loopholes. None of these well-intentioned regulations are straightforward. As an encouragement to make more zero-emissions vehicles (ZEVs), automakers that produce more than the mandated minimum can sell those credits for whatever price they can fetch to other makers that need them to avoid penalties. This is how Tesla has earned US$2-billion since 2010. Earlier this year, it was revealed that Tesla sold US$420-million of credits in 2018, and its biggest customers were Fiat-Chrysler and General Motors.
Is any of this actually helping the environment, as automakers play a shell game with ZEV credits and governments drive up the price of cars?
A friend of mine who owns a Tesla Model S, which he loves, has a theory that every generational switch in energy supply is ultimately detrimental to the planet. No energy is free, there’s always a cost, he says, but the less expensive and more easily available it becomes, the more of it we’ll use. People are just like that. We’ll leave the lights on and we’ll become more wasteful in our habits. If everyone drove a Tesla, he says, or a Chevy Bolt, or a Nissan Leaf, then our current surplus of clean hydro in Ontario and Quebec and British Columbia would be consumed to capacity, and our dirty hydro out West or down East would smog up the air like a Shanghai afternoon.
Mazda’s been arguing this for years. Sure, its engineers have been puttering away for the past decade or so with electric motors, but they’ve also been finessing the internal combustion engine into an ever-more-efficient machine. The latest iteration is called SkyActiv-X, released this month in Europe. It uses homogenous charge compression ignition – one of engineering’s holy grails – to improve fuel consumption and reduce emissions by 20 per cent while boosting power by 30 per cent.
“The latest engines, compliant with the latest regulations, don’t affect the environment so much. Tokyo, for example, is one of the biggest cities in the world, but it has no air pollution problems,” Mazda’s Mitsuo Hitomi, the managing officer in charge of its technical research centre in Germany, told me a couple of years ago.
“All we can do is come up with engines that satisfy regulations and meet people’s demands. But when we come up with a new internal combustion engine, some people say, ‘Why now? Why bother?’”
Certainly, Quebec seems not to care about improving the internal combustion engine. It wants electric power at whatever cost. So Mazda will show off its little battery-powered car at the Tokyo show and people will clap and it will be rushed to market in Quebec, and the politicians will feel pleased with themselves for forcing a change in thinking. For better or worse.
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