Will a President Donald Trump scrap the aggressive fuel-economy targets that automakers and President Obama agreed to five years ago?
Nobody knows. But automakers might not push him to go that far.
The auto industry will surely seek adjustments to federal regulations that force them to build cleaner, less polluting cars, and want to push deadlines into the future, industry experts told The Times.
But scrapping the Corporate Average Fuel Economy program altogether is probably not on their agenda, for several reasons:
Capital commitments: Automakers plan years ahead; they’ve already sunk billions into upcoming models designed with pending fuel standards in mind.
Global markets: Fuel-efficiency regulations and incentives are in place in major auto markets worldwide — including China, whose market is expanding dramatically, especially for “new energy” vehicles meant to curb urban pollution.
Consumer demand: With gas prices low, Americans are buying larger vehicles. But surveys and sales figures show they want sport utility vehicles and pickups to be as fuel efficient as possible.
Regulatory patchwork: California and other states concerned about global warming worked closely to harmonize their own regulations with CAFE. Gutting CAFE could break that consensus and cause automakers to adjust cars for the California market, something they’ve done in the past and would rather not do again.
Scrapping CAFE “wouldn’t stop them from having to develop fuel-efficient, clean vehicles for the rest of the world,” where strict environmental standards are likely to remain in place, said Michelle Krebs, senior analyst at Autotrader.
“They’re so far down the road” on developing energy-efficient products that fundamental changes in CAFE wouldn’t help them much, Krebs said. “Are they going to rip up their entire product plans? No, because these are global companies.”
CAFE has been around since 1975, passed by Congress as a means to achieve energy independence in the wake of the Arab oil embargo.
Greenhouse gas emissions were later folded into CAFE standards to help combat global warming. In 2011, automakers agreed to boost miles per gallon across their car and light-truck fleets.
(Those numbers cause great confusion and look more aggressive than they actually are because the Environmental Protection Agency uses different analyses, one for CAFE standards and another for the mileage numbers posted on new-car window stickers. The window sticker figures typically are 20% to 30% lower. Today’s window average is about 25 miles per gallon, and the current CAFE goal for 2025 is equivalent to about 40 miles per gallon.)
When they signed on, automakers insisted on a “mid-term review” in 2018. That’s where the Trump administration will probably make its mark.
Changes are in the works already. In a report this summer, government regulators said automakers were on track to meet the 2021 targets, but the 2025 goals would have to be trimmed back to accommodate the consumer shift toward crossovers, sport utility vehicles and pickups.
Regulators had assumed 67% of sales would be cars and 33% would be crossovers, SUVs, pickups and other small trucks. Now they’re expecting closer to a 50-50 mix.
Trump has made clear his disdain for what he sees as government over-regulation.
The day after the election, on Nov. 9, Trump senior policy advisor John Mashburn was quoted saying CAFE standards would be reviewed “to make sure they are not harming consumers or American workers.”
The next day, the big auto lobby group, the Alliance of Automobile Manufacturers, sent a letter to Trump’s transition team, a copy of which was leaked to Automotive News.
Alliance Chief Executive Mitch Bainwol called for creation of a presidential advisory committee to guide the review process, and hinted at a “new paradigm” for vehicle regulation. But the letter made no call for scrapping CAFE.
Government analysts at the time calculated CAFE-related prices would add $926 to the cost of an average vehicle sold in 2016 and $2000 in 2025. Although several outside analysts have made their own calculations that in some cases add thousands more to those figures, no one except perhaps the automakers themselves knows for sure.
When determining “consumer harm,” economists, regulators and politicians weigh costs of compliance against the social costs of air pollution and greenhouse gas emissions. (No matter how lightweight, vehicles must still meet traffic safety regulations.)
The new administration’s commitment to promoting green energy is also in question. Candidate Trump called global warming a hoax while promising to create new jobs.
Thus far, auto executives have been mostly noncommittal on the subject.
At the Los Angeles Auto Show, Ford Motor Chief Executive Mark Fields told The Times that he was “hopeful that the right policies are going to be put in place.”
Alan Batey, chief executive at General Motors’ Chevrolet division, deflected CAFE questions to talk about the company’s new electric car, the Bolt. “When it comes to electric, this is our investment in the future.” It is, he said, “not being sold as a compliance vehicle.”
Plug-in hybrid cars and electric vehicles, however, still make up less than 1% of auto sales, even with federal tax credits that can go as high as $7,500 — credits that doubtless will draw a critical review in the Republican Congress.
The rapid advances in fuel efficiencies have come mostly through technological refinements on gasoline-powered cars and light trucks: lighter materials for bodies and powertrains; more efficient engines and air conditioning systems; more sophisticated automatic transmissions; engines that turn off and on quickly instead of idling at traffic signals.
Some companies are making these advances faster than others. The Alliance lobby speaks for the industry as a whole, but each company has its own agenda.
The Japanese automakers, whose sales mix tends toward smaller vehicles, score high on overall fuel economy. The Detroit 3 – General Motors, Ford and FCA (formerly Chrysler) – sell a lot of trucks and big SUVs and sit at the bottom.
“We’re all in position now” to meet CAFE standards, David Zuchowski, chief executive of Hyundai Motor America, the U.S.-based arm of the Korean automaker, said at the auto show. “Any wild swings are probably unlikely.”
Even Ford might push to keep CAFE in place, albeit with some tweaks, said market forecaster Alan Baum of Baum & Associates.
“Ford really went out on a limb and a lot of observers are saying Ford is very much ahead,” Baum said. “If [CAFE] rules didn’t change, Ford would have an advantage because of the investments it’s already made relative to its competitors.”
Even as U.S. buyers move toward crossovers and SUVs, they’re still concerned about fuel economy.
A survey by Consumers Union in June showed that 70% of Americans agreed that the U.S. government should increase fuel-efficiency standards.
Consumers Union policy counsel Shannon Baker-Branstetter said the automakers “know customers want better fuel economy even in those big vehicles. Even within a class of vehicle size, we’re finding higher ownership satisfaction with higher fuel economy.”
The most fuel-efficient Ford F-150 engine is also the best-selling, she noted.
The concern for fuel economy goes beyond individual car buyers, Baum said. As consumers move to crossovers, “the light-truck, rear-wheel-drive category is becoming more of a commercial fleet product,” he said.
Because those trucks are being bought for business purposes, Baum said, fuel economy “is obviously a huge issue in the calculations.”
MORE BUSINESS NEWS