Background      In the 1990s, as part of its effort to reduce the total amount of pollutants emitted from California's cars and trucks, CARB voted to force automobile manufacturers to sell more electric cars (Zero Emission Vehicles, or ZEVs) in the state's new vehicle market. After almost a decade of the ZEV mandate, the results were fall below regulators expectations. Consumers simply did not take to the available technologies, and in some cases Detroit could not even give the electric cars away.

Bureaucracies rarely admit mistakes, and the ZEV fiasco was no exception. Instead, CARB quietly diluted the mandate by, in part, forcing the manufacturers to offer long-term warranties on their emissions parts in return for drastically lowering the number of ZEVs they must sell. State law permits the Board to mandate that Detroit warrant the parts for up to seven years or 70,000 miles.

State law also permits CARB to require manufacturers to recall and repair any vehicle when parts defects reach a certain magnitude. Recently several manufacturers won legal challenges against CARB when courts ruled that the Board must demonstrate that the alleged defect would actually result in a negative impact on air quality. Failure of the part alone does not, the courts ruled, constitute a violation of the regulations.

CARB staff were immediately concerned about the cost of meeting this burden of proof requirement, and in response proposed an amendment to their rules that would force Detroit to extend warranties to fifteen years or 150,000 miles. At its meeting in December of 2006, the Board heard objections to the proposal of significant magnitude that it postponed action on the matter pending further discussions between CARB staff and the affected parties.

The Challenge to the Aftermarket

CARB staff have asserted both formally and informally that their proposed new mandate would have only a negligible impact on the independent aftermarket. After all, they point out, their amendment would only affect the specific failed part, and only if it failed outside of the original warranty period.

Shop owners and consumers in the independent aftermarket have reason to look past these very reasonable assurances and concentrate on the trend pattern. They are appropriately concerned that they will get caught in the squeeze between the government's campaign to reduce vehicular pollution on the one hand and the national commitment to free, open, and competitive markets on the other.

Market dynamics set in motion by the OPEC oil embargo of 1979 (partly the result of the American response to the overthrow of the Shah of Iran), soon disadvantaged domestic against foreign manufacturers. It unleashed a long-term trend that has resulted in Toyota overtaking Ford last year as the second largest seller of automobiles. How long before it surpasses General Motors?

These dynamics were further impacted by federal legislation tightening vehicular air quality requirements. This had the effect of forcing motorists, manufacturers, and repair dealers to focus more attention on emissions components. Mandated warranties were just one result of these changes in federal law; enhanced inspection and maintenance (Smog Check) programs were another.

One of the unanticipated consequences of all these changes was the dramatic drop in the margin of profit in new car sales. This, along with the new emphasis on warranties, led dealers to expand their service departments. Naturally, any forces that would send more business into their stores would be welcome. This neatly dovetails with the long-standing desire by the manufacturers to capture the lion's share of the service market. 

The independent sector has watched all of these forces with dismay. It has fought back against most attempts to use government action to reduce its market share, from California's early 90s fight against the federal mandate for centralized emissions testing to its support of SB 1146 in 2000 to require manufacturers to share warranty repair information with the independent aftermarket.

The fact is, however, that the capital assets of the manufacturers and motor car dealers are far more concentrated than those of the independent sector, and are therefore more available to be directed into legislative, regulatory, and political activities that favor their sector in every case where there is a real or perceived divergence of interest.

These are the factors that independent sector players consider when evaluating CARB's latest proposal to extend even further the emissions repair warranties.