Trump links car prices, mpg rules; groups skeptical
Washington — President Donald Trump claims his proposal to roll back stringent gas mileage rules enacted by the Obama administration will reduce the price of a new car by $3,000. But there is little evidence to back up that claim, and consumer groups say motorists could save more than that in reduced fuel costs and vehicle maintenance if current rules are left in place.
Car prices indeed have climbed since 2012, when Barack Obama's White House finalized rules that would have required automakers to achieve fleetwide averages of more than 50 miles per gallon by 2025. But those increases can be attributed to the inclusion of new technologies such as infotainment systems and safety features — and because buyers are opting for bigger, more luxurious cars and trucks.
Ford Motor Co. and three other automakers rebuked the president's proposed mpg rollback earlier this month by reaching a pact with California to increase the average fuel economy of their fleets to about 50 miles per gallon by the end of the 2026 model year. That prompted an angry Twitter tirade by Trump last Wednesday, in which he said his plan to freeze mileage rules at about 39 miles per gallon for model years 2021 to 2026 would reduce sticker prices.
"My proposal to the politically correct Automobile Companies would lower the average price of a car to consumers by more than $3000, while at the same time making the cars substantially safer," Trump tweeted in anger after Ford, Volkswagen AG, Honda Motor Co. and BMW AG negotiated an agreement with the California Air Resources Board. "Engines would run smoother. Very little impact on the environment! Foolish executives!"
The average price of a new car in 2012 was $31,616, according to Kelley Blue Book. In 2017, when the mpg rules began taking effect, the average new car price was $35,300. Today, it is $37,307.
The U.S. Environmental Protection Agency and National Highway Traffic Safety Administration estimated in 2018 that keeping the Obama-era mileage rules in place would add $2,340 to the cost of owning a new car, based on estimated savings of $1,850 in average costs related to technologies that would be required to meet higher mpg rules and $490 in savings on ownership costs for financing, insurance and taxes. The figures are a measure of ownership costs and not sticker price.
That estimate is based on a 2012 analysis conducted by the Obama administration showing the Obama-era gas mileage rules would increase the total lifetime cost of a model-year 2025 vehicle by more than $3,000, according to EPA Press Secretary Michael Abboud. He said the Trump administration found a similar impact when it conducted its own analysis for its proposal to roll back the gas mileage rules.
The analysis pointed to by Abboud did estimate the cost of car ownership would go up by about $3,000 over the life of a vehicle — not the cost at the dealership. The analysis quickly added that the projected increase would be more than offset by lifetime fuel savings of $7,000 to $10,000.
"The main driver of the average transaction price up is really a lot of luxury features," said Shannon Baker-Branstetter, policy counsel on energy and environment for the advocacy division of Consumer Reports. "What automakers are offering and consumers are buying have luxury features and are larger vehicles."
Consumer Reports has projected that relaxing Obama-era mileage rules would cost motorists money — about $3,300 per new vehicle in increased fuel and vehicle maintenance costs. It said the Trump administration's proposed rollback is the equivalent to forcing new vehicle buyers to pay an additional gas tax of 63 cents per gallon by 2025.
Baker-Branstetter said the president is likely trying to deter other automakers from joining the mileage agreement with California.
"If additional automakers do it, he probably feels like that makes him look worse, and it undermines what he is trying to do at the national level," she said.
In fact, Democratic lawmakers in Washington have pressured General Motors Co., Fiat Chrysler Automobiles and a dozen other automakers to join the California pact.
The president directed his worst anger at Ford.
"Henry Ford would be very disappointed if he saw his modern-day descendants wanting to build a much more expensive car, that is far less safe and doesn’t work as well, because execs don’t want to fight California regulators," he tweeted Wednesday night after a volley earlier in the day.
In response, Ford said it "is proud to lead the way in taking the right actions for the environment while at the same time protecting consumer affordability and the short- and long-term health of the industry.
"We have consistently supported one 50-state solution for regulating fuel economy standards, and this agreement with California provides regulatory stability while reducing CO2 more than complying with two different standards. As always, we will continue to produce even cleaner, smarter and safer vehicles.”
Carmakers have consistently pushed for one national fuel-economy standard.
A longstanding waiver allows California and other states to set their own stricter auto emissions and mpg standards. Thirteen states and Washington, D.C., have adopted California’s mileage rules, meaning if the new fuel rules are pushed through, automakers could be left with one set of rules for a quarter of the country and another set for the remaining states, including Michigan. The White House has pushed to revoke that waiver.
The four carmakers agreed with California to voluntarily increase the average fuel economy of their fleets from 2021 levels by 3.7% per year, reaching an average of nearly 50 mpg by 2026. If the Trump administration is successful in its effort to roll back the Obama-era mpg standards, other automakers would be bound by less restrictive rules.
Luke Tonachel, director of clean vehicles and fuels at the Natural Resources Defense Council, said the fact that automakers are starting to reach voluntary agreements with California shows the White House plan "is dead on arrival."
Alliances with California or not, carmakers likely have little choice about improving the mileage performance of their vehicles if they hope to sell them in such places as Europe and China, said Charlie Chesbrough, a senior economist at Cox Automotive.
"Europe and China are already implementing significant fuel economy standards on their vehicle industries," he said. "If U.S. designed and manufactured products don’t achieve similar fuel economy and emissions levels, the domestic industry risks becoming regional companies only with limited global growth prospects.”