U.S. automakers have negotiated their way into a policy pickle.
In early May, a leaked document suggested the Trump administration would seek to freeze Corporate Average Fuel Economy (CAFE) standards at 37 miles per gallon rather than the 46.8 miles per gallon by 2026 set out by the Obama administration. Proponents of the stricter rules say they’re essential for climate progress and innovations in efficiency. And the auto industry has also asserted the rules have contributed to the surge in electric vehicles.
While automakers have spent years pushing back against Obama-era fuel standards for light-duty vehicles — standards the EPA previously determined are reachable — they’re now staring down a potential freeze of the regulations from the Trump administration, which car companies say they don’t want either.
"I don't think anybody in industry, when asked for reopening of standards, asked to level out to zero," a lobbyist for an auto manufacturer told Automotive News.
Meanwhile, environmental leaders have been stressing the clean air benefits of maintaining the CAFE rules, and an alliance of labor groups recently made the case that the regulations have helped boost investments in U.S.-based auto manufacturing. The Consumer Federation of America released an analysis last week that found passenger cars become safer and sell better as fuel economy improves.
Automakers including Fiat Chrysler, General Motors, Ford and Honda met with Trump last Friday to try to find a resolution. The group reportedly argued for a uniform emissions standard that would incorporate negotiations with California, a strong proponent of stringent requirements. That would keep the industry from having to straddle the gulf between California's regulations and laxer federal rules.
At the moment, though, California is on a collision course with the White House. On May 1, California Gov. Jerry Brown announced a joint lawsuit in partnership with 16 other states and the District of Columbia to stop Pruitt from undoing the fuel economy rules. The lawsuit adds even greater complexity to the situation, which is ultimately bad for business.
In a statement on the Friday meeting with Trump, the Alliance of Automobile Manufacturers said it appreciated the openness the president expressed about discussions with California. But with an unpredictable administration, the future of standards remains uncertain.
Experts say the path forward for electric vehicles, though, is clearer.
In a recent report, consulting firm ICF argues that other policy levers and international trends may make CAFE standards a moot point. “The [Environmental Protection] Agency’s about-face is not likely to have an appreciable impact on the long-term transformation that is already underway,” the report reads.
That’s based on a number of factors.
State-level actions led by California have compelled progress towards vehicles even more efficient than the EPA requires. Ambitious targets set out by China, which are modeled on California’s but made more stringent, have raised the bar internationally.
To keep up with demand domestically and compete abroad, automakers have promised to include more electric cars in future portfolios even as they lobby on Capitol Hill for looser restrictions. It’s a split strategy, but one experts say is unlikely to impact the tip toward an ever-increasing electric fleet.
“The cat is out of the bag on electrification,” said ICF technical director Phil Sheehy. “There’s just not a lot that you can do to undo what’s already been done there.”
California is undoubtedly the U.S. trendsetter when it comes to fuel-efficient cars. The state’s exemption to make its emissions requirements more stringent than EPA’s has spurred 12 states to follow. Those requirements have forced automakers to meet California’s standards to sell cars in those states.
Along with efficiency requirements, California’s Air Resources Board has a zero-emissions vehicle (ZEV) mandate requiring that car manufacturers deliver a certain number of plug-in, battery, and fuel cell electric and hybrid cars to consumers. By 2025 manufacturers must reach 16 percent ZEV sales. Nine states have adopted the same standards, accounting for nearly 30 percent of light-duty car sales according to ICF.
ICF argues that California’s ZEV standard, and the example it's set for other states, will play a larger role in vehicle electrification than will efficiency goals. The consulting firm also noted that a provision of the program that allowed automakers to meet percentages using mostly California sales will expire for battery electric cars this year, forcing higher ZEV sales in the other states to meet quotas.
The administration is still considering whether California can keep its waiver allowing it to set stricter standards, though reports of the Friday meeting suggested the president is open to negotiations with the Golden State. But even if that waiver is revoked, the rollback may include only emissions standards and not ZEV goals. On May 1, California along with 17 other states sued the administration over the possible rollback of rules and the potential loss of the state’s waiver.
While the U.S. quibbles over the details, China is taking a front seat on electric vehicles.
The world’s largest auto market saw April EV sales at 11.5 percent higher than the same month last year. From January through April, sales ballooned 149 percent compared to the same months in 2017 (that growth is tempered by the fact that sales were particularly slow in the first part of 2017).
The country has also set the world’s first national electric vehicle mandate. It requires electric vehicles to account for 12 percent of sales by 2020.
“The [New Energy Vehicle] mandate will contribute to transportation electrification in the United States no matter what the federal GHG emission standards for [Model Years] 2022-2025 look like,” wrote ICF in its report.
Bloomberg proclaimed in February that China was working to “become the Detroit of electric cars.”
If external factors have the impacts ICF expects, Detroit may have to push into overdrive to become a leader in electric cars. After the scare from the Trump administration, automakers could be more committed to tackling the challenge. Hours after meeting with President Trump, the Auto Alliance tweeted a link to an article on the site Motor Trend titled “Tesla Killers: The Rise of the E-Machine.”
“Tesla is about to be overwhelmed by electric vehicles from mainstream automakers,” the article reads. “A swarm of Tesla killers is coming.”