The Obscure Government Calculation That Could Make Hybrids Way More Important

There is no one government rule that dictates how efficient a car should be. In reality, it’s a few different rules and calculations. The one we were all focused on recently was about tailpipe emissions, but then there’s a less talked-about data point called the Petroleum Equivalency Factor, or PEF, which was also changed. And that change leads to some potential weirdness.

Hey, it’s Monday, we’re all excited about looking at the eclipse. And Eclipses. But there are other things to cast our (protected) eyes on this morning.

Ferrari is taking a closer look at battery technology, even if it’s, you know, not going to make any battery cells itself. Toyota is taking a closer at its scandal-plagued Daihatsu unit.

And we’re looking at used car values, because prices are coming down a bit.

Why PEF Could Mean More PHEVs

There’s a helpful and very detailed article from The Detroit News that gets into the obscure, but very important PEF issue. The whole idea of PEF actually goes back to Jimmy Carter, Lee Iacocca and a plan by the government to figure out how to calculate the mileage equivalency of EVs and hybrids, even if no one was yet making EVs or hybrids.

In an effort to make EVs an attractive proposition, the rules made an EV worth way, way more than a gas-powered car, even if the total emissions surrounding that vehicle and the energy it used didn’t quite match up. Non-EV automakers liked this PEF math because it allowed them to offset their gas-powered cars more easily. Companies like Tesla and environmental groups like the Sierra Club were averse, saying it slowed the transition to EVs by giving automakers too much credit.

Here’s how The Detroit News describes the impact of phasing in a more accurate calculation:

Imagining a world where Ford Motor Co. only sold its best-selling F-150 trucks, which come in electric and gas-powered varieties, the automaker could meet Biden’s proposed 2032 fuel economy targets by reaching 25% EV sales under the old PEF math.

With the new calculation, 98% of sales would have to be for the all-electric Ford F-150 Lightning models.

That’s a big difference. The auto industry’s main hype man, John Bozzella, doesn’t love this, as pointed out in this blog post:

Today the PEF formula equates a pure battery electric vehicle (BEV) with a gas-powered car that gets about 300 miles per gallon. That’s really high fuel economy. An EV doesn’t use gas, so that makes sense. (In truth, a BEV’s fuel economy is actually… infinity).

But the Energy Department proposed changing the PEF formula, slashing the equivalent fuel economy rating of a BEV by 72 percent in 2027.

That would have – for the purposes of a CAFE rating – said a battery electric vehicle is not that much more efficient than the most efficient internal combustion engine vehicle out there.

Really? The EV doesn’t use gas.

And, just for balance, here’s some of Tesla’s comments on the then-proposed rule changes:

Delaying the PEF would reward lengthy and inefficient vehicle design cycles. As some have called for, the design cycle in vehicle development should be ramped, modernized, and shortened. This is particularly true as the need to electrify rapidly the light duty vehicle sector is fundamental to addressing the climate crisis.

Ultimately, the Biden Administration agreed to delay the changeover until 2030 and downgraded EV fuel economy by about 25% less than originally proposed, which seems to be a decent compromise.

So where do hybrids fit into all this? Here is the full PEF rule change as printed in the Federal Register, and there’s a fun little bit of information tucked in there:

Some stakeholders commented on the application of the PEF to Plug-in Hybrid EVs (PHEVs) and argued that PHEVs were disproportionately advantaged by the new PEF. Tesla, Doc. No. 18, pg. 4; ZETA, Doc. No. 21, pg. 2. Specifically, they asserted that revised PEF value would decrease the fuel economy of PHEVs to approximately 60 to 75 percent of their current levels. However, according to these commenters, the revised PEF value would decrease the fuel economy of battery EVs (BEVs) to approximately 30 percent of their current levels. These commenters stated that DOE should address this “skewed incentive” because the revised PEF value would favor the inefficient PHEVs over more efficient BEVs. Tesla, Doc. No. 18, pg. 4; ZETA, Doc. No. 21, pg. 2.

So, Tesla, ZETA, and some other folks complained that the math favors PHEVs because PHEVs only have part of their calculation changed since the other part of the car is gas-powered. Is that true? The Department of Energy says kinda yes and kinda no:

The PEF value is used to convert the measured electrical energy consumption of an EV into a gasoline-equivalent fuel economy of electricity. For PHEVs, which consume both electricity and petroleum, PEF only applies to the measured electrical energy consumption and does not apply to the energy consumption of petroleum. Accordingly, the impact of a decreased PEF value on the fuel economy of a PHEV is less than the impact of a decreased PEF value on the fuel economy of a BEV, which consumes only electricity. In addition, the fuel economy of a BEV is still significantly greater than that of a PHEV. Accordingly, under the revised PEV value, auto manufacturers are still incentivized to invest in the more efficient BEVs.

I kinda see the point Tesla and others are making here, because if an automaker gets the right blend of fuel-efficient engine (in depletion mode) with a medium-sized battery pack that might be a faster/cheaper/easier way of offsetting the value of a specific vehicle. For example, here’s a vehicle that has enough battery to get about 60% of its range covered by EV mode and 40% by a gas-powered motor that gets 50 MPG:

Because this is an equivalency based on the power used (in watt hours per mile), the gasoline-powered portion of the equation hasn’t changed. It’s just EVs are worth less. If you’re trying to hit a number it might be cheaper and easier to supplant a portion of that with an electric motor for certain vehicles, rather than try to swap everything over to electric motors. As Tesla pointed out, a PHEV may be worth about 2/3rds of what it is worth now, whereas a BEV will only be worth about a third.

Clearly, we need to make PHEVs better.

Ferrari: ‘We Cannot Afford To Take Cells As Black Boxes’

I appreciate the forthrightness of the average exec for an Italian car company.

Ferrari is going to start making EVs because pretty much everyone has to make EVs. Ferrari also isn’t going to make any of its own batteries, but it at least is going to understand them, just to be safe.

Per Reuters, here’s CEO Benedetto Vigna:

“We want to open up cells and understand what is in there,” Vigna said at the opening of a research centre on battery cells in partnership with Italy’s Bologna University and chipmaker NXP Semiconductors.

“Production will always be done through external manufacturers, based on the know-how we hope to acquire through this research centre,” Vigna said during a presentation.

“We cannot afford to take cells as black boxes,” he added.

Toyota Clamping Down On Daihatsu After Daihatsu Charade

The Daihatsu Charade was a black mark for Toyota as the company had to admit that one of its subsidiaries falsified safety test results for decades in an effort to quickly get cars out the door.

While Daihatsu will maintain its position as the company making and developing certain small cars for Toyota (which it is very good at), it’s going to be Toyota that does the certifying. From Reuters again:

Daihatsu will move its reporting line for development and certification to another Toyota segment that focuses on compact cars.

The change will be made based on model changeover schedules.

Toyota would also become responsible for resource management and its optimisation related to Daihatsu’s business and product planning, Daihatsu President Masahiro Inoue said.

Used EVs Are Still Declining In Price

We’ve talked about how there’s a glut of cheap-but-nice used EVs that have suffered rapid depreciation and that seems to be borne out in the data, according to Cox Automotive/Manheim:

With the increase in interest in electric vehicle (EV) values versus the non-EV market, we are working on sharing metrics for those segments. Seasonally adjusted EV values for March 2024 were down 19.1%, while non-EVs were down 12.8% year over year. Regarding values against last month, seasonally adjusted EV values decreased substantially, falling by 5.3% from February 2024, while non-EVs were flat over the same period.

Right now BEVs are just lumped into one category, so it’ll be interesting to see if Cox/Manheim can come up with more specifics (are EV cars doing worse than EV SUVs?)

What I’m Listening To While Doing TMD

I played this for the kiddo today and even I was not prepared for how hard Bonnie Tyler goes on this song. Turn it up today!

The Big Question

What’s the right range for a PHEV? How big should the battery be?