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California's Mysterious War on Gasoline Cars

Stocks in this article: GM F TM

Take Toyota, for example. It is now selling the excellent Prius Plug-In as a "lighter" alternative to the Chevrolet Volt and Ford C-Max Energi. But that was not enough for California's regulatory whip!

Toyota also had to start selling pure EVs. It contracted with Tesla to engineer a special all-electric version of the now-outgoing 2012 model RAV4, and sell 2,600 units in California 2012-14. This is a fantastic automobile, and I highly recommend affluent California citizens get one.

However, if you consider the development cost for this low-volume production run, it would suggest that Toyota is losing a lot of money on each of these cars, currently priced around $50,000 pre-state and federal tax incentives.

In addition, Toyota engineered the Scion iQ EV, which is a marvel of a tiny city car, but in the end realized that it would not sell, even in California. Only 90 were built. Given the cost to engineer this fine automobile, I don't even dare speculate about the amount Toyota had to write off.

The list goes on: Fiat and Honda are also selling or leasing electric cars for California, probably at a big loss per car. Only because someone thinks that California's biggest problem is its air/climate/weather. It is so totally counter-intuitive that it gives me a headache.

The California bureaucrats would point to some chart showing that the air quality in Los Angeles is sometimes bad. Really? If so, why do people volunteer to live there? Why do people keep visiting? And why should alleged bad air/climate/weather in LA impact someone's car purchase if you live somewhere else in California and you will never drive to LA?

Bottom line: The attempt by California's government bureaucrats to force people into buying certain types of cars because of an alleged problem with California's air/climate/weather is totally counterintuitive. It also raises costs for the auto makers, who in the end of course have to pass these costs to the consumer.

The message to Sacramento should be: Stop trying to fix a problem that so obviously doesn't exist.

At the time of publication, the author had no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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