As the Fuel Economy War rages on, will electric cars take a hit?

The War on Fuel Economy Standards took a couple of twists over the past couple of weeks: first, three major automakers sided with the Trump administration, in direct opposition to four competitors that struck a compromise with the California Air Resources Board in July. Then, the administration backed off its earlier plan to completely freeze the standards, and hinted that it would consider a compromise. 

Above: Yes, tailpipe emissions will continue (Source: Charged)

The progress of the war so far: immediately following Trump’s election, US automakers sent a letter urging him to “reform” federal fuel economy, emissions and safety standards; the administration enthusiastically complied, announcing plans to freeze the standards, and set up a conflict with California, which enforces its own, more stringent regulations; in 2019 the automakers decided Trump had gone too far, and sent him another letter warning that an overzealous regulatory rollback threatened their profits; in July, Ford, Honda, Volkswagen and BMW struck a compromise with the California Air Resources Board (CARB) that called for only a modest loosening of the efficiency standards.

In the next phase of the war, GM, Toyota and Fiat Chrysler announced that they would side with the Trump administration, and endorse its radical rollback after all.

John Bozzella, Chief Executive of the Association of Global Automakers trade group, spoke for the three Trump-aligned automakers. The group has “historically taken the position that fuel economy is the sole purview of the federal government,” he told the New York Times. However, he held out hope for a compromise: “It doesn’t have to come to that…we can still reach an agreement that is supported by all the parties.”

Not only automakers, but state governments have been taking sides in the battle over states’ rights and air pollution standards. Since the Trump administration launched its crusade, Colorado, Minnesota and New Mexico have joined the “clean air states,” bringing the total to 15. In September, eloquent EV advocate Arnold Schwarzenegger wrote a Washington Post op-ed in support of California’s position.

A score of other states have joined California in a lawsuit against the Trump administration, maintaining that states’ authority to set their own pollution standards is part of the 1963 Clean Air Act, and that its revocation is unlawful.

“We are disappointed in the Association of Global Automakers for hiding behind the Trump administration’s skirts and its assault on public health,” said CARB Chairwoman Mary D. Nichols. “[California will] keep working with those automakers committed to a framework that delivers cleaner vehicles that benefit consumers and the environment.”

Above: A month ago, Trump said his administration would revoke California's federal waiver to regulate its car emissions (YouTube: CNBC)

In the latest development, the Trump administration backed down from its plan for a total freeze of the standards. “People familiar with the process” told the Wall Street Journal that the administration is now considering calling for a 1.5% annual increase in corporate average fuel efficiency. This target would be a compromise between the 4.7% annual gains under the existing Obama-era rules and the freeze at 2019 levels of around 37 mpg that the administration had proposed.

So now the combatants seem to be in a bargaining phase - the administration may settle for a 1.5% annual increase, while California and the other 14 states that follow its standards will try to hold out for the 3.7% agreed to in July. CARB responded to the administration’s proposal, saying that a 1.5% annual increase wouldn’t be enough for the state to meet federal air quality standards.

The administration’s rules are expected to be finalized by the end of this year, and some still hope for a compromise that will avoid a legal battle that could end up in the US Supreme Court. “I’m…the eternal optimist,” said EPA Administrator Andrew Wheeler. “Once everybody sees our final CAFE regulation, everybody will see that it makes sense and maybe we won’t have litigation on that part of it.”

The litigation is already in full swing however, and the baleful effects on the US EV industry are already plain to see. Over the past few months, global automakers (including GM and Toyota) have announced dozens of new plug-in models and billions in investment - the vast majority of it destined for China and Europe. Volkswagen and Honda are just two brands that have recently launched new EVs that they have no plans to bring to the US market.

The US Big Three (and Toyota) currently sell one plug-in vehicle each in North America, all of them aging, low-volume models. Furthermore, a recent report released by the Sierra Club notes that 74% of American auto dealerships still aren’t selling any electric vehicles.

The longer US political and business leaders try to hold back the technological tide, the more resources and decision-making power in the auto industry will migrate to Europe and China. Some opposition leaders understand this dynamic. Senator Chuck Schumer (D-New York) has proposed investing almost half a trillion dollars to help the US auto industry electrify. “My plan is estimated to create tens of thousands of new, good-paying jobs in this country and should re-establish the United States as the world leader in auto manufacturing,” he wrote in a in a New York Times op-ed. “But we have to move fast…If we don’t match the level of China’s commitment, we will miss an enormous opportunity.” (Ironically, a GM spokesperson offered words of praise for Schumer’s plan, days before the company’s actions took it in the opposite direction.)

Above: Could the Trump administration be holding back the future of EVs in the US? (Source: Charged)

Understatement of the week department: Senator Tom Carper (D-Delaware), who sits on the Senate Environment and Public Works Committee, told the Times that automakers’ struggle against clean air standards is “not in the long-term best interest of these companies - really, it’s just the opposite.”

===

A form of this article originally appeared in Charged. Author: Charles Morris. Sources: New York Times, Automotive News, Wall Street Journal