In 2016, U.S. automobile sales achieved a seventh consecutive annual increase. Americans bought 18.4 million new last year, exceeding economic forecasts that expected 17.7 million to roll out of dealerships.
America’s “Big 3” automakers were all winners, including GM, which enjoyed a 10 percent increase in sales over the previous year. Ford Motor Co. finished 2016 on a strong note, and Fiat Chrysler of America (FCA) turned out a respectable performance.
Meanwhile, most of the world’s largest automobile companies are quick to tout their sustainability credentials — including their continued improvement in the design and performance of electric vehicles.
Chrysler released an edgy new concept EV at the Consumer Electronics Show last month. GM says its Chevy Bolt is “game-changing.” And Ford recently announced that it will expand its all-electric car offerings over the next five years.
Nevertheless, the automakers have been steadfast in their resolve to oppose Environmental Protection Agency (EPA) fuel standards they say “cost thousands of jobs” and ignore the reality of consumer preferences.
The controversy flared up on Jan. 13, when outgoing EPA Administrator Gina McCarthy announced she would finalize greenhouse gas emissions standards for 2022 through 2025 models of cars and light trucks.
This midterm evaluation, or review process, was established in 2012 to give the EPA time to reach a decision on fuel economy for models built from this year through 2025. The EPA had until 2018 to make a final decision; and McCarthy finalized an earlier decision that left those efficiency standards unchanged.
By 2025, the nation’s fleet-wide fuel economy average will be 36 miles per gallon (MPG), 10 miles more than the current average, if McCarthy’s decision goes forward.
On the same day the EPA made this announcement, the Alliance of Automobile Manufacturers sent an email to its members opposing the decision:
“The EPA decision is disappointing but hardly surprising,” the industry trade group wrote. “Our fundamental priority remains striking the right balance to continue carbon reduction and fuel economy gains without compromising consumer affordability and vital jobs producing vehicles in this country.
“This crucial balance requires a midterm review that proceeds on the original EPA timetable, culminating not now but by April 2018.
“The Trump Administration will determine whether to accept this accelerated outcome or return to regular order and a process that focuses on achieving the full range of public policy objectives contemplated when the 2011 Agreement was struck.”
This story dates back to 2011 when, as part of the 2008-2009 automobile industry bailout, the Barack Obama administration reached an agreement with automakers to boost the nation’s fleet-wide efficiency standard to 54.5 MPG. The argument at the time was that consumers would save a collective $1.7 trillion in fuel costs and slash U.S. oil consumption by at least 12 billion barrels. Such changes, however, would have cost the automobile industry $200 billion over 13 years, Reuters reported last week.
Of course, that agreement was reached with no one thinking that gasoline prices would plunge in 2014 and stay stubbornly low for what has now been almost three years. McCarthy’s argument was that the final decision for a 36 MPG standard came despite the proliferation of technologies that would have allowed the average fuel economy to be even higher than 36 MPG a decade from now.
Nevertheless, the Alliance seeks to reverse McCarthy’s decision, in favor of what the trade group views as a far more amenable Donald Trump administration.
Automakers have also complained that there is a lack of alignment between the EPA, the National Highway Safety Transportation Administration (NHSTA) and the California Air Resources Board (CARB) on developing a consistent national standard for fuel efficiency. As staffer Steven Mufson of the Washington Post pointed out, however, the NHSTA has — for better or for worse — followed the EPA’s lead in recent months.
Environmental groups praised McCarthy’s decision, noting that the automakers reaped financial success while describing the EPA fuel-efficiency guidelines as a winner for both drivers and the environment.
According to the Union of Concerned Scientists, the 2015-2017 targets should save consumers about $50 billion in fuel costs by 2030 — a far more conservative estimate than what the Obama White House suggested six years ago. UCS also claims that these tighter fuel standards prevent 280 million metric tons of greenhouse gases from entering the atmosphere – the equivalent of shutting down 82 coal-fired power plants for one year.
GM and Chrysler would not comment directly on this story, instead deferring to the Alliance. “I respectfully urge you review the reg, note its sales-volume component and contrast the choices available to consumers, with the choices consumers are actually making,” a Fiat Chrysler representative told TriplePundit in an email. The Alliance did not respond to 3p’s requests for comment.
Yet the industry insists that its stance on fuel economy is consistent with its needs to remain vibrant and innovative. “Promoting electrification is consistent with our continued work to increase fuel economy and reduce emissions,” a Ford spokesperson wrote in an emailed statement to 3p. “After a significant acceleration by EPA, the collective industry position is to put the data-driven process back on track that will result in one national standard supported by EPA, NHTSA and CARB.”
Watch for the automakers to continue their push for the White House to reduce the fuel standards. After all, their argument that the balance of reducing carbon while keeping auto workers employed will find a receptive ear at 1600 Pennsylvania Avenue (though automation is chipping away at the industry’s jobs either way).
But as the president is finding out, changing the rules with a stroke of a pen is more complicated than it seems. And if oil suddenly spikes in price with no warning (just as oil dropped in price despite fears of instability due to the advances of Islamic State in the Middle East during 2014-2015), the automotive sector could find itself in a lurch as consumer preferences shift yet again.
Image credit: GM