The Trump administration is expanding its review of unrealistic Obama-era fuel economy rules, and that is good news for both automotive companies who’ve struggled to meet the government’s demands and consumers who pay the price for regulatory overreach.
The rules are estimated to add some $2,000 to vehicle prices, and they are forcing automakers to build small cars consumers don’t want. Demand is up in the United States for SUVs and trucks partly because of low fuel prices.
The U.S. Environmental Protection Agency and Department of Transportation are taking comments on mileage rules that require automakers to produce fleets averaging more than 50 miles per gallon by 2025. The rules were originally set for review by April 2018 (thanks to automaker pushback on the Obama administration’s proposal).
The agencies said last week that they are also taking feedback on the rules for the 2021 model year.
President Donald Trump’s decision earlier this year to reintroduce a full midterm review was a necessary first step. Shortly before leaving office, President Barack Obama tried to backtrack on the review via executive action.
“If the standards threatened auto jobs, then common-sense changes could have and should have been made,” Trump said at an event in Ypsilanti in March. “We are going to ensure that any regulations we have protect and defend your jobs, your factories. We are going to be fair.”
The 2018 data-driven midterm review is of the utmost importance to car companies attempting to meet Corporate Average Fuel Economy (CAFE) rules by 2025.
“Many of the assumptions that served as foundation for that ramp up are not where we thought they’d be,” says John Bozzella, president and CEO of Global Automakers, citing cheap gas prices and high market demands for light trucks and SUVs. “We do need regulation, but it needs to be flexible.”
Re-evaluation takes the front seat after the National Highway Traffic Safety Administration predicted that despite using all the technology the government identified as necessary for meeting standards, automakers will fail to do so for the first time, says Gloria Bergquist, vice president of communications for Auto Alliance.
“The tech is on sale, but if the consumers don’t buy it, we don’t meet the standards,” Bergquist says.
The current metric of meeting the standards assumes Americans want to buy electric, hybrid and lightweight vehicles, but recent trends show they don’t. Of the 17.6 million new cars sold last year, trucks and SUVs comprised 63 percent of sales, while electric vehicles contributed to about 1 percent of sales.
There are two reasons for this. Gas prices are low and people believe that trend will continue, so they feel comfortable purchasing trucks and SUVs with relatively high fuel economy, Bergquist said.
Also, many states don’t have the infrastructure, such as ample charging stations, to support electric vehicle sales, says Michelle Krebs, an analyst for Cox Automotive Auto Trader.
America’s consumers may be slower to respond to global trends, but Bozzella still believes a shift to less carbon-intensive mobility is happening — it’s just a question of how fast.
Regardless, auto companies need some regulatory consistency.
“If you start to make this a political football more than it already is, chances are it’ll be undone in four or eight years,” says Brett Smith, the assistant director of manufacturing engineering and technology at Center for Automotive Research.
EPA Administrator Scott Pruitt has said he wants to hear how the agency’s regulations are impacting automakers and the public.
That’s a smart approach grounded in reality, and the federal government should keep its promises to auto companies.