Since the start of the Obama administration, U.S. government agencies have had the auto industry in a choke hold, requiring it to meet incredibly lofty fuel economy and emissions standards. But now Donald Trump threatens to repeal some of those standards, and that could have a huge effect on the industry.
Corporate Average Fuel Economy standards have been around in the U.S. for more than 40 years, having drawn support from Republicans and Democrats alike. But perhaps never before have automakers been put under as severe strain to innovate products that Americans don’t actually want as today.
Gas prices today are low; Americans are voting with their wallets for big-displacement SUVs and trucks. And yet, the EPA and National Highway Traffic Safety Administration still require automakers to invest in costly technology to reduce pollution and decrease fuel consumption.
And Donald Trump’s administration recognizes the problem, as The Wall Street Journal quotes John Mashburn, a Trump senior policy adviser as saying:
The Trump Administration will complete a comprehensive review of all federal regulations. This includes a review of the fuel economy and emissions standards to make sure they are not harming consumers or American workers.
He went on:
It is important to remember that this particular program was first put in place as a way to reduce our nation’s dependence on foreign oil, not for purposes of global warming regulation...Mr. Trump will be focused on bringing jobs, including auto manufacturing, back to the U.S., and making sure that government policies are in the national interest.
In 2010, the EPA and the National Highway Traffic Safety Administration enacted the National Program, designed to “reduce greenhouse gas emissions and improve fuel economy.” In 2012, that program introduced the famous footprint-based “54.5 MPG by 2020,” requirement, and ever since, some automakers have struggled to meet annual targets, with many buying credits from Tesla and small car-based companies.
Fiat Chrysler has arguably felt the worst of it, as the lion’s share of the company’s profit comes from sales of reasonably priced, less-than-efficient trucks and SUVs. Sergio Marchionne has had a hard time finding a partner to help him sell small, efficient cars (in part, to meet regulations), but it’s likely Mr. Marchionne has breathed a sigh of relief after last night’s results.
If the Trump administration does lower CAFE requirements, or even eliminate them (Trump has threatened to kill the EPA, after all), the auto industry could be a proverbial free for all, with companies pumping out whatever makes the most money— i.e. SUVs and trucks—and spending less time and money eking out tiny incremental fuel economy gains to appease the feds.
The downside is, incentive to innovate technologies that yield better fuel economy and lower emissions will be all but nonexistent. But Trump and most Republicans will tell you that incentive should come from the market, not the government.
Will EPA emissions and fuel economy regs go away entirely? Probably not, but as with all things Trump, who knows what will actually happen. Your guess is as good as mine.