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

sierra research 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

sierra research Walk-Behind Mower Market 2002 Source: Briggs & Stratton

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

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

sierra research 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 Source: Briggs & Stratton

sierra research Retail Price Impacts

sierra research 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

sierra research 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

sierra research Analysis of Major Regulations  H&SC Section –…"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

sierra research Other Cost Factors Include  Equipment Manufacturer Costs  Financial Impacts of Reduced Sales in California

sierra research Potential Adverse Impacts  Pre-buy of lower cost units  Slower population turnover  Shift from mowers to handheld equipment  Out of state purchases

sierra research Summary  Regulations have Large Impacts on Retail Price  “Major” Regulation  Unintended Impacts Need to Be Addressed

sierra research 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.