How long does it take for 50% of cars to comply with a new law?

 In EV Industry

With the climate change conference underway in Paris, there is a lot of excitement around carbon reduction. Along with that excitement comes natural blowback from the likes of my uncle Sam (actual uncle, not metaphorical) asking if we really need to act now.

The urgency, I usually answer, is due to lead time.

While it is not a secret, it is not widely understood how long it takes for new regulations to get rolled out. So here is the question I have for you:

If we passed a law today that mandated all new vehicles meet some requirement, how long would it take for 50% of the vehicles on the road to comply with the new standard?

What would your answer be?  Ok, remember that number.  Now let’s walk through the answer using a specific example.

Let’s say that today there is a law passed that mandates that all new vehicles need to use a 48V auxiliary battery system instead of our existing 12V auxiliary battery system (I’m not lobbying for this, just using it as an example).  Today we made the following decree:

By official decree, all new light-duty road vehicles must utilize a 48V system for their auxiliaries.  

Boom.  Done.  Now let’s wait for the roll-out.

At this point it is important to note that we have assumed a) the industry has already developed all the necessary standards (SAE) to understand 48V system requirements and test procedures, b) that the supply chain has technology that is far enough along in its development, and that c) all the natural regulatory process is done. This is a really big assumption but like any good cooking show, let’s magically fast-forward to pulling the fully cooked meal out of the oven.  The law passed today.

For timing, we should consider three milestones:

  1. First model in the showroom
  2. All models in the showroom
  3. 50% of all vehicles on the road

1. How long until the first vehicles in the showroom comply with the new regulation? (Design Time)

In our consulting division at FleetCarma, the work we are doing is for MY2019 vehicles. And that work is almost done. Design work completes 2+ years in advance of vehicles hitting showrooms. The balance of the time is focused on manufacturing/supply chain preparations.

So with a law passed at the end of 2015, the first vehicles complying will arrive by MY2020, landing in 2019. And that is one model in the showroom.

2. How long until all the vehicles in the showroom comply with the new regulation? (Model Turnover)

Manufacturers launch a few all-new models every year. For example, perhaps in one year the Camry, RAV4, and Tacoma are all-new designs. The next year is the all-new Corolla and Prius. And so on.

Generally a manufacturer will turn-over all their models in a 5-6 year window. So our first 48V model showed up in MY2020, and will take until MY2025/MY2026 for all the vehicles in the showroom to meet the new regulation.

3. How long until 50% of all vehicles in the market comply with the new regulation? (Fleet Turnover)

Ok, so if one or two models have 48V in the MY2020 design and all models have 48V systems by MY2026, how long will it take until 50% of all the vehicles on the road have 48V comply with our new law? The average age of passenger vehicles in the US is 11.4 years, so the average car on the road right now is a MY2004/MY2005.

Assuming fleet turnover rates continue to stay the same, it means that we would certainly hit the 50% point by MY2037 (11 years after all vehicles in the showroom have 48V systems). But it would be a bit before that since some vehicles with 48V systems would have been sold in the MY2020-MY2026 time window. Let’s split the difference and call it MY2034 then.

(transportation nerds: yes, you are right, average VMT is higher for newer vehicles. Good point.  But the question was 50% of vehicles complying instead of 50% of miles traveled.  You can assume 50%-VMT point would be a year or two earlier.)

Anyway, what this means is that the law we passed today, in December 2015, resulted in half of the vehicles on the road complying with that law in December 2033.

18 years.

For half of the vehicles on the road to comply with the new law.

Vehicle regulation timeline

What This Means

We can draw three conclusions from this:

  1. Where possible, a retrofit option is appealing. It wouldn’t work for 48V systems, but it could work for other improvements being considered. Relying exclusively on OEM-integrated solutions results in a really long lead time.
  2. Accelerating fleet turn-over matters. Programs like cash-for-clunkers can play a key role in moving people into new/better vehicles. Outside of putting cash on the hood, simply offering a much better vehicle can accelerate turn-over. If new vehicles were autonomous would you be more likely to buy a new car faster?
  3. We need to act now. Because once we act it will take 18 years to see the impact on half of the vehicles.

So, if you’re in Paris right now, and you’re thinking about vehicle emissions – think about the year you want half the vehicles to have a certain technology. Subtract 18. That is the year you need to have the law passed by.

In the context of my daughter, if you want half the cars to meet some new standard by the time she graduates university, you have just over 18 months to pass that law. She turned 1 last week.

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