Is Honda’s Lease-Only BEV Just Another ‘Compliance Car’?

  • Emma Sandler
  • June 13, 2017
  • 0

Honda‘s Clarity BEV model — slated to rollout in August — will be a “lease-only” offering, with availability in California and Oregon for now, the carmaker said yesterday.

The vehicle will be offered for $269 a month, on a three-year lease, with $1,730 of down payment. The range was reported to be around 80 miles. Because the all-electric Clarity is only available for lease and cannot be purchased, it is likely that the production volumes will be low—afterall, the automaker is only offering the vehicle in “select dealerships” in California and Oregon.

“We wanted to launch the Clarity Electric in these states to gain adoption. We will continue to evaluate the potential for adding additional markets in the future,” Natalie Kumaratne, a spokeswoman for Environment & Safety Public Relations at Honda, told Mobility Finance.

It appears as though the Clarity BEV is a “compliance car,” which is an industry term for vehicles produced in low volumes only to meet California regulations for zero-emission vehicles (as opposed to an OEM making a car to sell at scale), Joshua Goldman, a federal EV policy expert at the Union of Concerned Scientists, told Mobility Finance.

Compliance vehicles emerged in 2012 when California began requiring that carmakers of a certain size ensure that at least a portion of their volume comes from zero-emission vehicles (ZEV) –either battery electric cars or fuel cell electric vehicles — Goldman said, adding that this kind of requirement will go into larger effect beginning in 2018 in the additional states that signed onto the California ZEV program.

OEMs have two options when faced with these regulations: they can either comply by producing a certain number of ZEV vehicles, or they can buy ZEV credits from another automaker that has secured them. Whether it is more cost efficient to produce a vehicle for compliance sake versus simply buying ZEV credits, is not a simple answer, Goldman said, because the economics of electric vehicles can vary. However, certain companies, like Tesla, have been able to stay afloat for so long because they can sell their ZEV credits.

There are tell-tale signs that the Clarity BEV is a compliance car, in that it only offers 80-89 miles on a full charge, while the existing technology allows for far superior BEV vehicles, as exhibited by the Nissan Leaf, which offers 107 miles, and the Bolt EV, which offers 238 miles. Another sign is that the Clarity EV is priced higher than vehicles with longer battery range, like the Nissan Leaf which is about ~$199 for 36 months.

“We believe our marketing strategy is the right approach at this time,” Kumaratne said.

Compliance cars appear to be a topic of tension for some automakers, such as Fiat, with its Fiat 500e electric car.

“I hope you don’t buy it, because every time I sell one it costs me $14,000,” Sergio Marchionne, Fiat Chrysler Automobiles chief executive, said to an audience at the Brookings Institution. “I will sell the (minimum) of what I need to sell and not one more,” he added.

Many automakers have been very reluctant to sell EVs because they haven’t seen stable policy on those vehicles. Plus, automakers can have the biggest profit margins on SUVs and pickup trucks, Goldman said, adding, however, that OEMs like Chevrolet, Tesla, Nissan, and BMW are leaders nationwide in EV technology and production.

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