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Is the BMW i3 Really in Trouble in California Already?

Dave Hurst — January 9, 2014

An article from TheStreet.com, an advice and news website for equity investors, has declared that just as the i3 is launching, a “critical BMW selling point has been removed, resulting in a huge victory for Tesla as well as BMW’s other competitors.”  The BMW i3 comes in two variations: a battery electric version and a range extended version (called the i3 REx).  The reporter, Anton Wahlman, observes that the BMW i3 REx will not qualify for a white carpool lane sticker in California.  That’s perceived by Wahlman to be a huge disadvantage for BMW.  Is it really?

First, a little primer on California carpool lane stickers is needed here.  There are two carpool lane stickers available in California.  White HOV access stickers are reserved for vehicles that meet federal Inherently Low Emissions Vehicle (ILEV) standards and green HOV access stickers are reserved for qualifying Advanced Technology Partial Zero Emission Vehicles (AT PZEVs).  The California Air Resources Board (CARB) maintains a list of vehicles that qualify for these designations.  (As an aside, the still well-recognized yellow HOV access stickers adorning the back of many a Toyota Prius in California have now sunset and are no longer available.)

Wahlman reports that BMW was working “with California’s regulatory bureaucrats to create a new class of car” that would qualify the i3 REx for a white sticker.  However, in conversations with CARB, I’ve learned that this is not necessarily the case.  The Street is likely referring to the regulatory category Range Extended Battery Electric Vehicle (BEVx) that was added in January 2012.  Regardless of whether in regulatory vernacular the vehicle is a BEVx or not, in order to qualify for a white sticker the vehicle has to qualify for the federal ILEV certification.  CARB told me that BMW has worked with them over the last couple years on several different iterations of the i3 REx prior to launch and it wasn’t clear whether the vehicle would qualify for the ILEV certification.  However, the bottom line is that, in its current form, the REx does not qualify for the ILEV certification and, therefore, does not qualify for the white sticker (the i3 without the range extender, however, does qualify for the white sticker because it is all electric without emissions).

Wahlman does correctly point out that there is a limit of 40,000 green stickers available, and the CARB website indicates that “as of November 8, 2013, 24,452 ‘green’ stickers have been issued.”  When these will run out is a pretty good question, though at the pace that Chevrolet Volts and Prius Plug-ins (both of which qualify for green stickers) have been selling in California, it’s a safe bet that they won’t be available this time next year.

So, is the BMW i3 dead on arrival in California, as The Street would have one believe?  Far from it.  First of all, the question really comes down to this: What will be the take rate of the i3 REx versus the i3 all electric version?  Wahlman claims that the i3 REx is “likely what most prospective BMW i3 customers wanted,” but I’m not sure how he came to that conclusion.  In fact, I suspect the all-electric version will outsell the REx in California, regardless of HOV access – in part, because the performance of REx hasn’t been getting the same rave reviews as the all-electric version, but also because it’s almost $4,000 higher in price.

Then, there is the question of whether this is coup for Tesla.  Competitively speaking, the i3 with the range extender is still almost $25,000 less than a Model S, and the two cars have significantly different body styles.  Are they competitors?  To some degree, yes, because the EV market is still small.  But in the increasingly mature market, they are likely competing in the same way a BMW 328 Grand Turismo competes with a Mercedes E-Class.  The small i3 hatchback will be a fit for some lifestyles (and wallets), while others will need the larger Model S.  While BMW may have been hoping for white stickers for the i3 REx, this hardly qualifies as a major setback for BMW – and it’s probably something they knew was coming.

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