While China is going full speed ahead with pro-EV policies that many believe
could make it the center of the automotive industry in a few short years, the
US is entering a period of regulatory uncertainty that is sure to stifle long-term
planning and local investment.
Two days after Trump’s election in 2016, the lobbyist group funded by the
auto manufacturers sent him a letter asking for previously-agreed fuel economy
standards to be watered down. The new administration enthusiastically agreed
and began dismantling the policy.
Three years later, many automakers are saying, “Never mind!”
The administration’s new rules, which are expected to be made public within
the next couple of months, would eliminate the previously-agreed mileage target
of 54.5 mpg by 2025, and freeze fuel economy standards at about 37 mpg. Cal-
ifornia and 13 other states (and Canada), are expected to stick with the stricter
standards, which is likely to lead to drawn-out litigation and uncertainty.
Over the past few months, as the New York Times reports, automakers have
“grown alarmed at the expanding scope of the administration’s plan.” In June,
17 companies, including all the largest global automakers (with the exception of
Fiat Chrysler), sent Trump another letter, this time warning that the regulatory
rollback threatens their profits, and will produce “untenable” instability, and
asking him to forge a compromise with California. The auto execs sent a similar
letter to California Governor Gavin Newsom.
It’s not so much the lower emissions standards or the reduced fines for
non-compliance the automakers object to - their big fear is that competing
standards could create two parallel auto markets in the US. Automakers would
have to demonstrate that the average mileage of cars sold in the 13 clean-air
states is higher than in the other states. Dealers in different states could end up
selling different mixes of vehicles at different prices. And a lively cross-border
grey market for gas-guzzlers could quickly develop, creating more regulatory
worries.
The automakers say they want a standard that is “midway” between the strict
California-style rules and the laissez-faire Trump vision. “We strongly believe
the best path to preserve good auto jobs and keep new vehicles affordable for
more Americans is a final rule supported by all parties - including California,”
they wrote.
However, Governor Newsom has said he’s not interested in any deal that
would require California to water down its rules, and in February, the White
House announced that it had ended talks with the state, all but guaranteeing a
lengthy cycle of litigation.
One supporter of the tougher standards suggests how automakers could end
the battle. “At this point, they need to state clearly and bravely what they’re go-
ing to do, and then they should cut a separate deal with California,” said Margo
Oge, a consultant and former EPA official who wrote a book on fuel economy
regulation. “I’ve told the companies that siding with California is the only thing
that’s going to protect them from uncertainty.”
The results of this regulatory unrest, together with federal EV policies that are
lagging behind those of other major global markets, can already be seen. Atlas
Public Policy is tracking some $350 billion in private electrification investment,
and only 10% of that is destined for the US. Also, Reuters reported in January
that automakers were planning investments of $300 billion in electrification
projects - only $34 billion of that will be spent in the US.Christian Ruoff | Publisher
EVs are here. Try to keep up.Regulatory uncertainty looms in the US
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