Toyota Hit Hardest By New California Emissions Standards

June 5, 2009

Yesterday, Toyota announced that it will launch a fleet of plug-in hybrids later in 2009. The company's timing couldn't have been better.

California's new emissions legislation set to take effect in 2012 has a special requirement for automakers that sell over 60,000 vehicles per year in the state: at least 3% of those vehicles must be non-polluting. (Caveat: technically, that's 3% over the course of three years, or roughly 1% per year. Also, some of those vehicles can be sold in New York, Massachusetts, and other states that match California's emissions guidelines.)

For Toyota, the new law will likely translate into around 16,000 fuel cell, electric, and/or plug-in hybrid sales over the three year period. Between research and development of those autos, plus manufacturing, marketing, dealer training, and more, the legislation could be a $1 billion blow to Toyota.

Of course, Toyota won't be alone in its struggle to meet these new standards; in fact, most major brands will be affected. However, Toyota currently sells 24.1% of all new vehicles in California--nearly twice as many as its closest rival, Honda, at 12.9%--meaning that Toyota will bear the biggest burden.

The issue of state-by-state emissions standards is a contentious one, and even the greenest of the green would have to admit that using one set of nationwide regulations is the fairest and most efficient policy for government and automakers alike.  If we had to look for a silver lining in all this, it'd have to be that since California accounts for a huge chunk of new car sales in the U.S. (roughly 12%), it's forcing automakers to prepare for the inevitably stricter federal standards to come. Now, if only people will buy the cars...

[source: Bloomberg]

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