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Costs and Unintended Impacts

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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Costs and Unintended Impacts

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  1. Costs and Unintended Impacts James M. Lyons Sierra Research, Inc. July 2, 2003

  2. 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

  3. Walk-Behind Mower Market2002 Source: Briggs & Stratton

  4. WBM Market Factors(“Very important “or “Somewhat important”) Source: Briggs & Stratton

  5. WBM Selection Factors(reasons cited for selecting a particular WBM) Source: Briggs & Stratton

  6. Estimated Costs forNon-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 Source: Briggs & Stratton

  7. Retail Price Impacts

  8. 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 Source: Briggs & Stratton

  9. 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 Source: Briggs & Stratton

  10. 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

  11. Other Cost Factors Include • Equipment Manufacturer Costs • Financial Impacts of Reduced Sales in California

  12. Potential Adverse Impacts • Pre-buy of lower cost units • Slower population turnover • Shift from mowers to handheld equipment • Out of state purchases

  13. Summary • Regulations have Large Impacts on Retail Price • “Major” Regulation • Unintended Impacts Need to Be Addressed

  14. 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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