Toyota Reveals Concerns on Prius Conversions
Jun 29, 2007 (From the CalCars-News archive)

For the first time, we have a statement revealing what Toyota thinks
about hybrid conversions. So far, over 50 Priuses have been
"green-tuned" (see <http://www.calcars.org/where-phevs-are.html>),
using perhaps a dozen different engineering methods and batteries, by
a broad range of companies, groups and individuals. See
<http://www.calcars.org/howtoget.html> for a list of who's who in the
conversion world. The quick summary: availability is extremely
limited; the opportunity for volume deliveries remains a future
possibility. Meanwhile, one company is getting the most attention for
fleet sales; one is doing a few conversions for individuals; others
are slowly ramping up, and the "do-it-yourself" solution is almost
ready for prime time.

CalCars values conversions because they increase awareness and
support for PHEVs. At the same time, they offer a partial response to
the intense demand for PHEVs from people who can't believe we have to
wait for years for something we should already have. Our strategic
goal in promoting conversions is to motivate, pressure and
incentivize carmakers to build PHEVs. Of course, once automakers
finally do sell PHEVs, there will also be many hundreds of thousands
of hybrid candidates for safe, affordable, warranted retrofits.

DELAY AT TOYOTA AFFECTS CONVERSION OPPORTUNITY
Now Toyota has decided to push back by six months its introduction of
the 2009 Prius, to defer use of lithium-ion batteries, and we infer,
to delay even the consideration of introducing a PHEV. So betting on
who will be first to introduce a PHEV now shifts to GM, and perhaps
to Ford, Malcolm Bricklin's Visionary Vehicles and others. At the
same time, public institutions ranging from the US Department of
Energy to the California Air Resources Board and the Climate Action
Registry are considering how to evaluate, credit and incentivize
PHEVs built both by carmakers and aftermarket converters. The
prospect of having to wait years for PHEVs from carmakers means a
wider "window of opportunity" -- and an even larger need for
after-market conversions.

Until today, Toyota has publicly said simply that conversions would
affect the warranty of Priuses. (See
<http://www.calcars.org/calcars-news/683.html>.) Hybrids have
multiple warranties; presumably the one that would be involved is the
emissions system, including the battery, electronics and motor. The
issue has not yet come up. Meanwhile, owners of converted cars get
gold-plated service from their dealers, who find themselves liking
demonstrations of how much better a hybrid can perform than the stock model.


CONGRESSIONAL ACTION UPS THE ANTE
Last week, PHEVs were key subjects of amendments developed by the
Senate Finance Committee. (See
<http://www.calcars.org/calcars-news/776.html>.) Incentives provided
to PHEV buyers included conversions. Unfortunately, these amendments
were ultimately not added to the Senate's Energy Bill. But they could
still find their way in through activity on the House side. Current
proposals under active consideration include substantial multi-city
demonstration fleets using conversions.

The Finance Committee amendments prompted a semi-public response by
Toyota. Below we reproduce Toyota's memo sent to the Senate Finance
Committee staff on June 20. This memo may have contributed to the
scaling down of conversion incentives when the original texts of the
provisions were modified and adopted.

We hope that our publicizing this document, followed by some of our
responses, as well as the actual text of the amendment language, will
contribute to the dialogue within the aftermarket community, and will
help automakers gauge the impact of the conversion movement on their
own product development plans and timetables. And we hope even the
fact that we're talking about this will highlight the larger point:
Our large international car companies are the ones who should be
resolving the issues raised -- they can do the job right!


FULL TEXT OF TOYOTA'S MEMO "PHEV CONVERSIONS"
Charles E. Ing, Director, Government Affairs Toyota Motor North America

Both with respect to safety and emissions, PHEV converters should
comply with existing standards governing second stage manufacturers,
if applicable, and, NHTSA and EPA should be required to establish new
regulations for certification of conversions of used vehicles. In
other words, the product liability and warranty risk, should be
assumed by the converter. The government should assure that there be
no degradation in emissions and vehicle safety before it provides
taxpayer incentives.

Following are the reasons why:

Based on Argonne National Lab testing of two converted Prius hybrids
to PHEVs -- the Hymotion and Energy CS PHEV conversions -- both
generate significantly higher NOx and total HC emissions when
compared to a stock Prius. This is particularly evident after cold
start, when Prius emissions are virtually zero. (See the attached
chart.) This raises the question of whether the government should be
paying people to make their cars dirtier?

The primary problem with plug-in hybrid electric conversions (PHEV
conversions) is that the modifications to the factory-built vehicle
take the vehicle out of compliance with the Federal Motor Vehicle
Safety Standards ("FMVSS"). After-market converters do not perform
crash testing to certify that the converted vehicle meets or exceeds
FMVSS. The risk is highest in terms of rear-end collisions because
these vehicles are generally converted by adding a substantial number
of batteries in the trunk or cargo section of the vehicle.

General potential risks are as follows:

Increased Risk of Fire:
Toyota equips its hybrid vehicles with nickel metal hydride
batteries. PHEV conversion vehicles are typically equipped with
either lithium-ion batteries or lead-acid batteries. Lithium-ion
batteries carry a higher risk of fire. Toyota recently decided
against using lithium-ion batteries in the next generation of hybrid
vehicles due to concerns that these batteries can overheat and catch
fire. Similarly, lead-acid batteries contain sulfuric acid which can
escape the battery and can burn occupants in an accident.

Other Increased Risk of Injury in an Accident:
Because the converted vehicles are not tested for compliance with
FMVSS 301, which deals with fuel tank integrity and related
crashworthiness issues, there is a risk that the aftermarket
batteries can compromise the fuel system and/or crashworthiness. This
can happen due to the composition of the batteries as well as the
added weight and placement of the batteries in the trunk/cargo area.
The mass of these batteries can often extend into the zone of the
rear bumper, increasing safety concerns. These added batteries can
become projectiles in an accident.

Adverse Effect on Rear Suspension:
Because these batteries often weigh hundreds of pounds in total and
add weight to the rear of the vehicle, the rear suspension and
handling and stability of the vehicle is compromised, increasing the
risk of accident.

Compromised PowerTrain/Voiding of Warranty:
In order to add the extra battery capacity, converters have to hack
into and modify the software in the hybrid's Engine Control Module.
Such modification may damage the battery pack and engine; it also
voids the express warranty provided by Toyota at the point of sale.

Increased Risk of Electrical Shock:
PHEV conversions are generally used with a home outlet. However, we
are aware of no testing (such as compliance with UL standards) done
to ensure compatibility between these batteries and home electrical
wiring. This poses a risk of electrical shock and even fire.

Removal of Spare Tire:
Many converters use the entirety of the trunk and cargo area and
either remove the spare tire completely or make it inaccessible. This
poses a risk in the event of a flat tire in an emergency situation.

Noncompliance With EPA Regulations:
Toyota's hybrid vehicles are compliant with EPA regulations on
emissions. To the extent hybrid plug-in converters interfere with the
ECM and the vehicle's emissions, the vehicle may then not be in
compliance with EPA regulations.


OUR GENERAL COMMENTS
* It's important to distinguish between the first prototypes, not
crash-tested, and the installed conversions aftermarket companies
expect to sell to consumers in high volumes in the future.
* As is evident in the proposed legislation, the bill's definition of
"qualified plug-in electric drive motor vehicle" means they must meet
environmental, as well as National Highway Traffic Safety
Administration (NTSA) and Federal Motor Vehicle Safety Standards
(FMVSS) crash testing standards in order to qualify for any credits.
Toyota's objections will not apply to eligible vehicles.
* No conversions we are aware of "hack into" the Engine Control Module.
* Many of the emerging conversion designs now expect to retain the
spare tire. For those that don't, it's worth noting that Honda, GM
and other carmakers sell some models with no spare.
* Some conversion companies are using lithium batteries with
chemistries that are fire-resistant. Others are engineering their
packs with electrical and mechanical measures for isolating and
suppressing, without vehicle-level damage, any incident caused by
standard lithium batteries. (This is what Tesla Motors has already
done and crash-tested.)
* Makers of chargers are applying for UL certification.
* The Argonne tests refer to cold-start emissions before the
catalytic converter has warmed up. Aftermarket companies expect to
incorporate technical solutions to keep the system warm.
* In saying conversions could make cars "dirtier," Toyota doesn't
mention CO2 emissions, where PHEVs come out way ahead of non-hybrids
and, depending on the energy mix of the electricity, are as good as
or far better than hybrids. (In its ads for its hybrids, Toyota
focuses on NOx and HC rather than the greenhouse gas emissions that
are increasingly taking center stage in discussions of environmental
impacts of cars -- and that are directly correlated to MPG.
* Finally, not a comment on Toyota, but on the amendments (texts
follow): both versions allow incentives only for conversions
completed by 2009 or 2010. This would seriously limit the
incentivization of aftermarket converters to ramp up production,. It
does not address the benefit of converting the many nearly-new
hybrids that will remain on the roads for more than a decade to come.


ORIGINALLY PROPOSED IN THE FREEDOM ACT:
(b) Conversion Kits-
(1) IN GENERAL- Section 30B of the Internal Revenue Code of 1986
(relating to alternative motor vehicle credit) is amended by
redesignating subsections (i) and (j) as subsections (j) and (k),
respectively, and by inserting after subsection (h) the following new
subsection:
(i) Plug-in Conversion Credit-
(1) IN GENERAL- For purposes of subsection (a), the plug-in
conversion credit determined under this subsection with respect to
any motor vehicle which is converted to a qualified plug-in electric
drive motor vehicle is the lesser of--
(A) an amount equal to--
(i) $2,000, plus
(ii) $400 for each kilowatt hour of capacity of the plug-in
traction battery module installed in such vehicle in excess of 2.5
kilowatt hours, or
(B) 50 percent of the cost of the plug-in traction battery
module installed in such vehicle as part of such conversion.
(2) LIMITATIONS- The amount of the credit allowed under this
subsection shall not exceed $4,000 with respect to the conversion of
any motor vehicle.
(3) DEFINITIONS AND SPECIAL RULES- For purposes of this subsection--
(A) QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE- The
term qualified plug-in electric drive motor vehicle' means any new
qualified plug-in electric drive motor vehicle (as defined in section
30D(c), determined without regard to paragraphs (4) and (6) thereof).
(B) PLUG-IN TRACTION BATTERY MODULE- The term plug-in
traction battery module' means an electro-chemical energy storage
device which--
(i) has a traction battery capacity of not less than 2.5 kilowatt hours,
(ii) is equipped with an electrical plug by means of which it
can be energized and recharged when plugged into an external source
of electric power,
(iii) consists of a standardized configuration and is mass produced,
(iv) has been tested and approved by the National Highway
Transportation Safety Administration as compliant with applicable
motor vehicle and motor vehicle equipment safety standards when
installed by a mechanic with standardized training in protocols
established by the battery manufacturer as part of a nationwide
distribution program, and
(v) is certified by a battery manufacturer as meeting the
requirements of clauses (i) through (iv).
(C) CREDIT ALLOWED TO LESSOR OF BATTERY MODULE- In the case of
a plug-in traction battery module which is leased to the taxpayer,
the credit allowed under this subsection shall be allowed to the
lessor of the plug-in traction battery module.
(D) CREDIT ALLOWED IN ADDITION TO OTHER CREDITS- The credit
allowed under this subsection shall be allowed with respect to a
motor vehicle notwithstanding whether a credit has been allowed with
respect to such motor vehicle under this section (other than this
subsection) in any preceding taxable year.
(4) TERMINATION- This subsection shall not apply to
conversions made after December 31, 2010.'.
(2) CREDIT TREATED AS PART OF ALTERNATIVE MOTOR VEHICLE CREDIT-
Section 30B(a) of such Code is amended by striking and' at the end
of paragraph (3), by striking the period at the end of paragraph (4)
and inserting , and', and by adding at the end the following new paragraph:
(5) the plug-in conversion credit determined under subsection (i).'.
(3) NO RECAPTURE FOR VEHICLES CONVERTED TO QUALIFIED PLUG-IN
ELECTRIC DRIVE MOTOR VEHICLES- Paragraph (8) of section 30B(h) of
such Code is amended by adding at the end the following: , except
that no benefit shall be recaptured if such property ceases to
eligible for such credit by reason of conversion to a qualified
plug-in electric drive motor vehicle.'


REDUCED INCENTIVE VERSION THAT WAS IN FINANCE COMMITTEE AMENDMENT
(Small language changes, but the main difference is the lower credit
amount and a shorter applicability window)
(b) Conversion Kits.--
(1) IN GENERAL.--Section 30B (relating to alternative motor
vehicle credit) is amended by redesignating subsections (i) and (j)
as subsections (j) and (k), respectively, and by inserting after
subsection (h) the following new subsection:
(i) Plug-in Conversion Credit.--
(1) IN GENERAL.--For purposes of subsection (a), the plug-in
conversion credit determined under this subsection with respect to
any motor vehicle which is converted to a qualified plug-in electric
drive motor vehicle is an amount equal to 10 percent of the cost of
the plug-in traction battery module installed in such vehicle as part
of such conversion.
(2) LIMITATIONS.--The amount of the credit allowed under
this subsection shall not exceed $2,500 with respect to the
conversion of any motor vehicle.
(3) DEFINITIONS AND SPECIAL RULES.--For purposes of this subsection--
(A) QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE.--The
term qualified plug-in electric drive motor vehicle' means any new
qualified plug-in electric drive motor vehicle (as defined in section
30D(c), determined without regard to paragraphs (4) and (6) thereof).
(B) PLUG-IN TRACTION BATTERY MODULE.--The term plug-in
traction battery module' means an electro-chemical energy storage
device which--
(i) has a traction battery capacity of not less than 2.5
kilowatt hours,
(ii) is equipped with an electrical plug by means of which
it can be energized and recharged when plugged into an external
source of electric power,
(iii) consists of a standardized configuration and is mass produced,
(iv) has been tested and approved by the National Highway
Transportation Safety Administration as compliant with applicable
motor vehicle and motor vehicle equipment safety standards when
installed by a mechanic with standardized training in protocols
established by the battery manufacturer as part of a nationwide
distribution program, and
(v) is certified by a battery manufacturer as meeting the
requirements of clauses (i) through (iv).
(C) CREDIT ALLOWED TO LESSOR OF BATTERY MODULE.--In the case
of a plug-in traction battery module which is leased to the taxpayer,
the credit allowed under this subsection shall be allowed to the
lessor of the plug-in traction battery module.
(D) CREDIT ALLOWED IN ADDITION TO OTHER CREDITS.--The credit
allowed under this subsection shall be allowed with respect to a
motor vehicle notwithstanding whether a credit has been allowed with
respect to such motor vehicle under this section (other than this
subsection) in any preceding taxable year.
(4) TERMINATION.--This subsection shall not apply to
conversions made after December 31, 2009.''.
(2) CREDIT TREATED AS PART OF ALTERNATIVE MOTOR VEHICLE
CREDIT.--Section 30B(a) is amended by striking and'' at the end
of paragraph (3), by striking the period at the end of paragraph (4)
and inserting , and'', and by adding at the end the following new
paragraph:
(5) the plug-in conversion credit determined under subsection (i).''.
(3) NO RECAPTURE FOR VEHICLES CONVERTED TO QUALIFIED PLUG-IN
ELECTRIC DRIVE MOTOR VEHICLES.--Paragraph (8) of section 30B(h) is
amended by adding at the end the following: , except that no
benefit shall be recaptured if such property ceases to be eligible
for such credit by reason of conversion to a qualified plug-in
electric drive motor vehicle.''
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2007, in
taxable years beginning after such date