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9 August 2019

Tearing up fuel efficiency rules will leave US car makers in the lurch

There is a lot of concern in the US about the behavior of President Trump around the vehicle efficiency standard he is pushing through. Basically he is making it so that US manufacturers do not have to make cars ever more petrol efficient, replacing rules laid down by President Obama.

He is doing this via the new US Oxymoron, the Environment Protection Agency, who’s role under Trump appears to be anything but the protection of the environment.

It is fairly simple what’s going on. Obama wanted car makers to make their cars a little bit more petrol efficient every year, Trump wants to freeze the efficiency. California says that it plans to insist on the old Obama rules, or better, and Trump is trying to block California’s independence in this matter.= by eliminating a waiver given the California.

There is a global shift to higher performing engines with regulations set by as variety over overseas governments. Car engines that are designed in the US won’t meet those regulations, so they will have to design a different engine to be globally competitive, and meanwhile major US car makers will remain villains in the climate change argument that is raging.

Of course heightened fuel efficiency means selling less gasoline per car per mile, and that ends their cozy-coexistence with the oil companies. And the arrival of EVs “en masse” in around 2024/5, changes the rules once again. Any other President elected during that time will immediately tighten up the EPA rules, and force the car makers to go back to their design drawing boards. So what Mister Trump is doing is only really helpful to oil companies, and we know that’s not going to last (see story elsewhere in this issue on oil price).

There is also the idea of a compromise deal between California and four automakers, including Volkswagen, Honda, BMW and Ford, to increase fuel economy standards and instead of making one set of cars for California, they will all adhere across the US to California’s standards, which is to increase fleet fuel economy by an annual 3.7% from model years 2022 through 2026.

The Trump rule is about holding fire at the agreed 2020 levels, which is 42.7 miles per gallon for passenger cars and President Trump called the California deal with these car makers nothing more than a “publicity stunt.”

While this dispute may end up in court, where all the new rules will be tied up until the next presidency, this constant tinkering with every Obama piece of legislation, leads to a presidency that is making zero progress – with the world moving to entirely emission-less cars at breakneck speed, while Trump simply says “hold your horses, we’re fine where we are.” Which in effect undermines the competitiveness of US car makers, who are witnessing dramatic falls in sales across the world and who have all almost missed the EV revolution.

Promoting EVs is an “easy win” for any government that wants to be seen as decarbonizing and that’s where the trend is.

There have been estimates around this week, one from clean energy advocacy group Energy Innovation saying that if Trump takes away the waiver power for California to set its own emissions, this would cost the US about $400 billion by 2050. Whereas fulfilling the Obama rules would have saved consumers around $8,000 over the life of one car. Boosting the US economy by up to $40 billion. Well you can make numbers say anything you want, but the idea that the US can set its own rules for cars in isolation from Europe and China will lead to massive economic mistakes that could cost the US global vehicle leadership. Maybe it already has.