In terms of a car of the future, what do we want?
What can we afford to buy and to drive?
Should we buy a hybrid, gasoline, or all-electric engine?
Truck, SUV or fuel economy all the way?
Do vehicle emissions even come into play when we are thinking about buying a car?
Ten years ago, the great recession hit, and the auto industry (along with many others) were on the ropes. The Obama administration handed to automakers a bailout with the promise in return that they would achieve a fleet wide fuel efficiency of 54.5 mpg on new cars by 2025. Even though there has always been tension between the Feds and California, the technical assessment (announced in the summer of 2016) for the vehicle emissions standards was years in the making with work done by the EPA, the National Highway Traffic Safety Administration and the California Air Resources Board.
In April, the Trump Administration announced that it would be changing that deal. Also in April, the Environmental Protection Agency (EPA) openly threatened California by stating that it may revoke the state’s ability under the Clean Air Act to impose stricter standards than the Feds set for vehicle emissions.
This past week, a draft document circulated from the Trump administration that the National Highway Traffic Safety Administration (NHTSA) will likely propose freezing fuel economy standards from 2020 through 2026 which is just short of 42 mpg.
On May 1, 2018, California, 16 other states and the District of Columbia filed a federal lawsuit challenging the Environmental Protection Agency’s decision in April to declare US Corporate Average Fuel Economy (CAFÉ) rules through 2025 “not appropriate.”
California Governor Jerry Brown said after the filing that the EPA is breaking the law and putting people at risk. “This is about health. It’s about life and death. He added that EPA Chief Scott Pruitt and President Trump want motorists to buy more gas and create more pollution.
The most populated state in the country and the sixth largest economy in the world (behind US, China, Japan, Germany and the UK), California has an air pollution problem due to geography and just the sheer number of vehicles on the road. For decades, the state, along with other high air pollution states, have been committed to cleaning up their air and have even legislated higher emission standards than the rest of the country. Since automakers did not want to make more than one kind of car for the American market, they built cars set at the California emissions standards.
In a way automakers are hedging their bets. They are making inroads into electric and hybrids while at the same time asking the Feds to lower the emission standards. Ironically, a US Court of Appeals ruled in April that the NHTSA could not waive penalties if automakers did not meet the current CAFÉ Standards. Three environmental groups brought suit in the summer of 2017.
Fuse.org, an energy industry focused website thinks a long, litigious road on fuel economy is the worse outcome for all stakeholders. And it is. The more the issue of vehicle emissions standards lingers in this never-never land of proposition, the less time anyone has to figure out what to with the car of the future.
But there are more intersections here to consider.
Ford announced late last month the company plans to reduce its passenger car lineup to just two models and instead focus on trucks, SUVs and crossovers. The Fusion, Focus, Fiesta and Taurus are gone. According to industry forecasters LMC Automotive, by 2022, 73 percent of all consumer vehicle sales in the US will be utility vehicles while only 27 percent will be cars. LCM predicts that by 2022, Ford will have 90 percent of their US sales volume be crossovers, SUVs and trucks followed by Chrysler at 97 percent and General Motors at 84 percent.
The Big 3 believe that consumers want bigger cars now and that is why they are pushing the Trump Administration to lower the CAFÉ standards while at the same time hedging their bets on building electric and hybrids models.
Lowering vehicle emissions helps the environment overall and allows people with chronic lung diseases to breathe easier. Building lower emission cars however is less lucrative for automakers and more expensive for consumers and there is less money coming in from federal and state gas taxes.
In a recent post on Reason.com’s Hit and Run Blog, writer Ronald Bailey wrote about a new study conducted by Georgetown University’s economist Arik Levinson that contrasted the effects on consumers of energy efficiency standards vs. the raising of the gas tax. The premise Levinson used is that both are a regressive tax which means taking a larger percentage of a lower income and a smaller percentage of a higher income. Basically, which is worse for poor and middle income Americans? Citing earlier research that estimates a gas tax increase would cost 71 percent less than the comparable CAFÉ standards per gallon of fuel saved. Based on other studies and criteria, Levinson concluded that if policy makers want drivers to use less fuel, taxing gasoline is a much cheaper way to achieve the goal of fuel efficiency.
Would this then reverse the American consumer appetite for SUVs, crossovers and trucks?
Would people drive less and/or buy more fuel efficient models?
That actually happened right after the great recession 10 years ago. Gas prices soared, people stopped driving so much and new car buyers wanted more fuel efficient vehicles. And then several years later, gas prices went down again, people drove more and new car buyers wanted bigger cars. That is where we are now.
We live in interesting times indeed.
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