Editorial: Fuel regs could end boom years

The Detroit News

The U.S. automotive industry blows into the North American International Auto Show on the winds of an all-time record setting sales year. North American sales reached nearly 17.5 million vehicles in 2015, affirming the domestic industry has fully recovered from its near death eight years ago.

But as always with this industry, the dark clouds are never far above the horizon.

A dive into the sales numbers reveals they were driven in large part by demand for sport utility vehicles and pickups. Truck sales exploded as fuel prices plummeted — oil last week reached a 12-year low of $32 a barrel, which should keep gasoline at its current sub-$2 a gallon level.

Consumers have never warmed to small, fuel-efficient vehicles when gasoline prices are low. And the 2015 sales numbers bear that out.

Market share for battery-powered vehicles fell to a mere 2.5 percent last year, a decline of 20 percent.

If automakers were operating in a true marketplace, this wouldn’t matter. Consumers are buying the vehicles they want, and because of an abundance of cheap oil can afford to drive, with the added benefit that they are the most profitable models for automakers to sell.

But the automotive marketplace is skewed by government regulations, and so the good news from 2015 risks becoming very bad news by 2020, barring major technological breakthroughs or a sharp change in consumer appetites.

That’s the year California, the nation’s largest automotive marketplace, will require that 10 percent of all vehicles sold in the state be zero-emission. If the target is missed, automakers will be fined $5,000 for every car and truck it sells in California.

Close behind the California mandate comes the Environmental Protection Agency requirement of a fleet-wide fuel economy standard of 54.5 miles per gallon by 2025, nearly double the current 24.7 mpg average.

Automakers are hoping for some relief when a midterm review of the mandate is conducted next year. But given the commitment President Barack Obama made in Paris last month to drastically slash carbon emissions, adjustments in the automakers’ favor seem unlikely.

That’s why the companies will be hyping electric and hybrid vehicles when auto show press days open at Cobo Center on Monday, even though consumers have so little interest in the products.

What motorists want doesn’t matter. Without some regulatory relief or a big spike in gasoline prices, automakers will have to very soon stop serving the consumer marketplace and focus most of their energy on the government marketplace.

What that means in real terms is that they will have to limit production of gasoline-powered SUVs and pickups and force more battery-powered vehicles on buyers, whether they like it or not, or be prepared to pay large fines to the government for missing the targets.

And since selling those low-emission vehicles is not yet profitable — electric cars still come with big government subsidies — it’s easy to predict a sudden reversal in the industry’s now-robust health.

In Michigan, we know what that means to the local economy. It will be all sunshine and roses this week as the auto industry celebrates its boom year. But keep an eye on those dark clouds.