Of the approximately 83,000 U.S. Volkswagen, Audi, and Porsche models from the 2009 through 2016 model years with emissions-cheating 3.0-liter TDI V-6 engines—some of which will be bought back through a massive settlement—about 16,000 are registered in California. And California, which has set its own ZEV mandate requiring electric vehicles, has taken what might be seen as a disproportionately strong role in determining how Volkswagen makes amends—to the point where Sacramento is dictating the automaker’s product lineup.
The federal Secondary Consent Decree released this week for VW, Audi, and Porsche vehicles with 3.0-liter TDI V-6 engines included a separate document for California. The California Partial Consent Decree, ancillary to the massive federal Consent Decree that lays out how that will happen, has several California-specific stipulations that have little connection to SUVs and luxury sedans equipped with the TDI V-6. They go well beyond stating to whom Volkswagen should pay fines or how the state should spend its $800 million share of the $2 billion VW is mandated to spend for infrastructure updates. It could be the first time ever in which an automaker is required by regulators to build a particular product—a product that might not even have been in the pipeline—as punishment for wrongdoing.
California, Here We Come?
“The manufacturers will provide at least three new models of electric vehicles for sale in California—including at least one SUV model—before 2019,” the California Air Resources Board (CARB) said in a statement accompanying the document’s release. “The companies must add a second electric SUV model by 2020 and keep these electric models on the market through at least 2025.”
Volkswagen of America would not comment regarding California’s additional vehicle stipulations and what they might mean for its future product lineup. CARB specified that the e-Golf can be one of the three models required to go on sale before 2019. But in the near term, that still leaves two other vehicles that are clearly spelled out as fully electric models. That’s at least a year earlier than the timeline Volkswagen has specified for the development of its battery-centric Modular Electric Drive (MEB) platform—and production versions of two concepts shown this year, the I.D. EV from the Paris auto show and the Microbus-inspired Budd-e from the CES technology show.
To put on a cynic’s hat for a moment, what this might mean is an Audi A3 counterpart to the e-Golf, as well as, perhaps, a compliance run of an electric Tiguan (a vehicle that, as of the 2018 model year, will use the Golf’s MQB platform).
While that could be the case, California specifies meaningful sales volume, saying that VW is “required to sell 35,000 total units of the three additional BEV models (or their successors) during the seven-year period 2019 to 2025,” but that ”they are not required to sell 5000 units in any given year.”
Focusing on Cities and Low-Income Households
The California-specific requirements also compel Volkswagen to complete two Green City initiatives. These can include the establishment of car-sharing services, zero-emission transit applications, or zero-emission freight transport projects, and they have to be implemented in cities with a population of 500,000 or more “that predominantly consist of disadvantaged communities” as identified by a mapping tool.
The settlement for California also requires Volkswagen to make a payment of $25 million by July 1, 2017, in support of vehicle replacement programs and specifically Plus-Up, a program that helps people in low-income communities in the San Joaquin Valley and South Coast regions get an electric vehicle at reduced cost. Their trade-in clunker is crushed onsite.
Volkswagen can’t sell the extra ZEV credits it earns from these new electric models it sells, either. But the agreement does leave the automaker an emergency lever to pull with an unexpected market turn: If prevailing market conditions, like the price of gas, overall vehicle sales, or the product mix change in a way that makes it difficult to meet battery-electric vehicle (BEV) sales numbers, California will meet with VW to modify the sales targets.
In all, it adds up to a sort of ankle monitor for Volkswagen. The irony is that, a decade from now, Volkswagen might have an advantage over many other automakers because of the mistakes it made in the past.
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