White House rolls back car mpg rules; critics call it irresponsible
Washington — Promising lower car prices, the White House finalized its plan Tuesday to roll back stringent gas-mileage rules enacted by the Obama administration, part of a years-long effort by President Donald Trump and his team to dismantle a critical part of his predecessor's climate agenda.
The move, decried by climate activists as the biggest environmental setback of Trump's tenure, is part of a broader arc of environmental deregulation that has been a staple of his administration and supportive Republicans in Congress. Prior moves include reopening coal mines, rolling back power plant emissions, revoking California's power to set its own emission standards for cars. Several of the moves have triggered lawsuits.
Trump administration officials presented the rollback as an effort to provide certainty to automakers who chafed under Obama's stringent mpg rules. Trump initially went further than most automakers were publicly seeking by proposing a freeze in rates after 2020, and even a slight retrenchment to a modest annual increase divided the industry.
The new mileage plan calls for reducing the required annual fleetwide average mpg increases for automakers for model years 2021-26 — from the original 5% that would have required, to a less-stringent 1.5%. Automakers will be required to achieve a fleetwide average of 40.4 mpg by 2026 under the new requirements, down from an average of 46.7 mpg for cars and trucks by 2025 that was mandated in the existing regulations.
The White House had initially proposed a complete freeze in gas mileage rates at 2020 levels until 2026.
Environmentalists and consumer advocacy groups argue the edict will hurt air quality and cost consumers due to increased fuel costs and repairs. The Trump administration defended the move as an effort to lower the price of new cars at a time when drivers are hanging on to their vehicles for an average length of over a decade.
"These standards are reasonable, realistic and achievable, and reflect the fact that times and technologies have changed since the original rules were enacted in 2012," U.S. Transportation Secretary Elaine Chao said on a conference call with reporters in Washington, D.C.
"Our estimates show that these changes will save consumers more than $1,000 in price tag alone, so this means that new vehicles will be more affordable for consumers, more will be sold and we’ll be safer overall," Chao continued.
EPA Administrator Andrew Wheeler added: “All new vehicles will continue to be subject to strict pollution standards of the Clean Air Act, and new vehicles will be subject to higher pollution standards than the older vehicles they replace."
Noting the average age of a car on U.S. roads has jumped to 12 years old from eight years old in 1990, Wheeler said: "Either consumers cannot afford the price of new vehicles or they are not interested in purchasing certain types of new vehicles."
In a statement, John Bozzella, president and CEO of Alliance for Automotive Innovation, which lobbies for automakers, said of the new rules: "The auto industry has consistently called for year-over-year fuel economy and greenhouse gas improvements that also recognize that the standards originally developed almost a decade ago are no longer appropriate in light of shifting market conditions and consumer preferences."
Analysts questioned whether automakers will be able to change course on mileage quickly enough to realize the Trump administration's promises of lower sticker prices.
"Given the current state of the market, it's difficult to imagine that automakers could afford to pass along any of the cost savings currently outlined by the SAFE vehicles rule or depend on NHTSA/EPA's projections that a reduction in regulatory costs would lead to a boost in vehicle sales," said Jessica Caldwell, Edmunds' Executive Director of Insights.
"Additionally, automakers have already solidified most of their plans up until 2026, and since the pendulum could swing back in the other direction during the next election cycle, it's unlikely that they'd take on the risk of switching to less stringent guidelines, even if they could," she continued.
The move to roll back the rules has already triggered lawsuits that are likely to tie the nation's mileage standards up in court for years to come.
"We will be prepared to act when legally we are allowed to on this rule," California Attorney General Xavier Becerra, a Democrat, said on a conference call.
Environmental and consumer advocacy groups in Washington voted to back up California in its effort to fight the mpg rollback in court.
"I am hoping that automakers know better than to go along with this illegal, ill-conceived and dangerous rollback," Gina McCarthy, president and CEO of the Natural Resources Defense Council and former Environmental Protection Agency Administrator in the Obama administration, in a statement. "The clean cars program helped them bounce back from the 2008 financial crisis and achieve record sales. They should join us in fighting back. We’ll be seeing the Trump administration in court.”
Jack Gillis, executive director of Consumer Federation of America, chastised the Trump administration for moving to roll back the Obama-era mileage rules during the coronavirus pandemic.
"This tone-deaf, irresponsible effort will cost consumers at the pump, cost American jobs, reduce the value of U.S. vehicles globally and further damage the environment and the air we breathe," Gillis said.
The Trump administration said the proposal to roll back the gas-mileage rules will reduce the price of a new car by $1,000. But 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.
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 $36,590.
The EPA 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. But those figures are a measure of ownership costs and not sticker price.
Automakers had asked Trump to take another look at the fuel economy rules after he moved into the White House in 2017. The rules were put in place in the wake of the auto bailouts of 2008 and 2009, when the federal government had maximum leverage over the industry after giving $51 billion and $12.5 billion respectively in federal bailouts to GM and Chrysler in 2008 and 2009. Ford Motor Co. did not take federal money.
The companies repaid most of the money received in the initial bailout, although the federal government lost $11.2 billion on the transactions that resulted in the U.S. divesting of GM's stock. The federal government also suffered a $1.3 billion loss when the Treasury ended its ownership stake in Chrysler Group LLC.
The Obama-era standards would have required automakers to increase fleetwide fuel economy by about 5% annually toward a goal of 54.5 miles per gallon for cars by 2025. The Obama administration moved to finalize the rules ahead of schedule after Trump's 2016 victory, setting off a chain of events that has led to the current dispute.
Trump went beyond what most automakers were seeking by proposing a freeze that would lock in mpg rates until 2026 at 2020 levels, when automakers would be required to produce fleets that average about 39 miles per gallon.
California, which helped craft the Obama-era rules, sued over the rollback and also an effort by the EPA to the revoke its right to set its own more-stringent mpg requirements. The nation's largest state accounts for 12% of the U.S. auto market. Thirteen states and Washington, D.C., have adopted California’s gas mileage rules.
Ford angered the White House in July when it reached an agreement 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. Volkswagen, Honda and BMW were also part of that agreement. The Department of Justice launched an antitrust investigation, which has since been dropped.
Automakers achieved a record-high average of 25.1 miles per gallon for vehicles made during the 2018 model year, according to data released by the EPA. The figure was up slightly from the previous record of 24.9 miles per gallon that automakers averaged in the 2017 model year. But the industry fell short of marks set by the Obama administration, and most manufacturers only remained in compliance with the standards by cashing in credits from previous model years.
Preliminary fuel economy for the 2019 model year, which will not be finalized until 2021, is projected to be 25.5 miles per gallon. Tesla led all automakers for 2018 with an average of 113.7 miles per gallon for its fleet, followed by Honda with an average of 30 miles per gallon. Subaru and Mazda followed with averages of 28.7 miles per gallon and Hyundai rounded out the top five with an average of 28.6 miles per gallon.
Detroit manufacturers lagged behind foreign-owned competition in meeting the stringent fuel economy standards now under review by the Trump administration. General Motors, Ford and Fiat Chrysler Automobiles ranked 12th, 13th and 14th respectively among 14 manufacturers who were measured. GM averaged 23 miles per gallon, while Ford averaged 22.4 and Fiat Chrysler averaged 21.7.