Transcript Costs and Unintended Impacts James M. Lyons Sierra Research, Inc.

Costs and Unintended
Impacts
James M. Lyons
Sierra Research, Inc.
July 2, 2003
Outline
 Walk Behind Mower (WBM) Market
 Per Unit Costs for Engine Manufacturers
for Engines used in Commercial and
Residential Applications
 Impact on WBM Prices
 Overall Costs
 Unintended Impacts
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Walk-Behind Mower Market
2002
25%
0-199=39.3%
20%
200-399=46.1%
15%
10%
400+=14.6%
5%
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or
e
m
59
9
or
00
$6
$5
00
-$
49
9
$4
00
-$
39
9
$3
00
-$
29
9
$2
50
-$
24
9
$2
00
-$
19
9
-$
50
$1
$1
00
-$
14
9
0%
Source: Briggs & Stratton
WBM Market Factors
(“Very important “or “Somewhat important”)
100%
80%
60%
40%
20%
0%
Under $200
Engine Horsepower
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$200 - $399
Blade Size
Low Polluting Engine
$400 Plus
OHV engine
Source: Briggs & Stratton
WBM Selection Factors
(reasons cited for selecting a particular WBM)
70%
60%
50%
40%
30%
20%
10%
0%
Under $200
"Lowest priced mower"
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$200 - $399
"Best model I could afford"
Source: Briggs & Stratton
Estimated Costs for
Non-Handheld Engines
 Engine Manufacturer Costs for Exhaust
and Evap:
– Commercial Engines = $128 per unit
– Residential Engines = $79 per unit
 Costs for complete units may be higher
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Source: Briggs & Stratton
Retail Price Impacts
40
33.6
35
30
25
20
15
12.5
10
5
0.73
3.3
3.7
Coatings
RFG III
0
LEV II
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Hairspray
WBMs
(Price Increase as Percentage of Retail Price)
Overall Costs
(Engine Manufacturers Only)
 Commercial Engines
– CA Sales = 81,150 per year
– Annual Cost = $10.4 million
 Residential Engines
– CA Sales = 731,000 per year
– Annual Cost = $57.8 million
 Overall CA Cost = $68.2 million per year
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Source: Briggs & Stratton
Cost to California Businesses
 Estimated Sales = 122,000 units per
year
 Average Cost = $112 per unit (engine
manufacturer cost only)
 Cost to CA Businesses = $13.6 million
per year
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Source: Briggs & Stratton
Analysis of Major Regulations
 H&SC Section 57005
– …"major regulation" means any regulation that will
have an economic impact on the state's business
enterprises in an amount exceeding ten million
dollars ($10,000,000)…
 Requires consideration of alternatives

following “guidelines”
Most recent guidelines dated 12/9/96
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Other Cost Factors Include
 Equipment Manufacturer Costs
 Financial Impacts of Reduced Sales in
California
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Potential Adverse Impacts
 Pre-buy of lower cost units
 Slower population turnover
 Shift from mowers to handheld
equipment
 Out of state purchases
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Summary
 Regulations have Large Impacts on
Retail Price
 “Major” Regulation
 Unintended Impacts Need to Be
Addressed
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Regulatory Price Impact





LEV II exhaust and evap for PCs to SULEV standard
– $131 per vehicle for exhaust and $25 per vehicle for evap = 0.73
percent of vehicle cost ($21,440)
Aerosol Coatings, Antiperspirants and Deodorants, and
Consumer Products
– 10 cents per bottle = 3.3 percent of average can ($3 can)
Reformulated Gasoline (RFG III)
– 5.5 cents mid-point estimate per gallon first year, lower costs
afterwards = 3.7 percent of $1.50 gallon of gasoline
Hairspray Rule Amendments (55 % VOC limit)
– 12.5 cents per bottle (mid-point estimate) = 12.5 percent of low
cost product ($1 bottle)
Small off-road engine rule
– $79 per WBM = 33.6 percent of median WBM price of $235.
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