President Trump’s plans for the biggest deregulatory effort of his presidency, a rescinding of California-led tailpipe emission standards established late in the Obama administration, have run into mounting opposition from automakers that have joined forces with California Gov. Gavin Newsom, a Democrat.
Ford, Honda, Volkswagen and BMW have agreed to comply with the stricter California benchmarks and essentially ignore the Trump administration’s plans to freeze miles-per-gallon requirements at the 2020 standards. They make nearly one-third of the vehicles sold in the U.S., and German automaker Mercedes-Benz reportedly is ready to join them.
The growing resistance will complicate, and could imperil, the administration’s nearly three-year-long effort to create a nationwide emissions standard. The administration plans to release its final rule on CAFE standards before the end of this year.
The Rhodium Group, a research consultant on economic policy, said the California deal could “greatly weaken the Trump administration’s hand” if more automakers sign on.
“Beyond improving fuel economy, California aims to scale up electric vehicle penetration and is currently considering banning internal combustion engines entirely,” the group said in its analysis. “The state has just proven it has sizable leverage to push policy forward. Automakers, looking for regulatory certainty and policy support for their growing electric vehicle investments, may prove a willing partner.”
White House spokesman Judd Deere said the automakers will regret siding with California.
“Empowering California is dangerous and will lead to automotive products that have no connection to market demand, and thus slumping sales and job losses,” he tweeted. “Ford is leading more than half of the autos into bed with CA, rather than snuggling up to Pres. Trump & the regulatory relief he is promising them. And while the choice may deliver the stability they crave for the short term, it is bound to bring sleepless nights down the road.”
Mr. Trump said his move also will reduce the average cost of an automobile and improve auto safety.
“My proposal to the politically correct Automobile Companies would lower the average price of a car to consumers by more than $3000, while at the same time making the cars substantially safer,” the president tweeted last week. “Engines would run smoother. Very little impact on the environment! Foolish executives!”
Mr. Trump aims to roll back an Obama administration rule that required automakers to raise the average standard of new cars and trucks to 54.5 miles per gallon by 2025. The White House wants the standard to be roughly 37 miles a gallon through 2026, but 13 states have joined California in pledging to move toward the stricter standard.
Mr. Newsom is hoping to win the higher national profile he has long sought.
“This is checkmate,” Mr. Newsom told Politico last week. “This is showing the limits of the power of this administration.”
California is expected to sue the administration over the new rule. The administration’s position is that the federal government has sole authority over auto design and safety standards.
Administration officials say privately that the automakers siding with California are trying to publicly take credit for their “green” posture while quietly encouraging the administration to move ahead with its effort to freeze mileage standards.
Automakers are counting on selling a certain number of electric vehicles to help them meet the higher fuel economy standards, but critics say the auto companies know that electric vehicles aren’t selling well enough in the U.S. to meet manufacturers’ expectations for overall fleet mileage standards.
California has sued the administration to block its effort, and the litigation could take years to resolve, leaving automakers in the uncertain middle.
As the battle plays out, consumers increasingly prefer SUVs and light trucks, which get lower mileage than cars and electric vehicles. Buyers want better fuel economy, said IHS Markit principal automotive analyst Stephanie Brinley, but they pick the types of vehicles they want first and then check for mileage.
SUVs are taller and heavier than cars and run into more wind resistance no matter how sculpted their bodies are.
“It comes down to the laws of physics,” said Jake Fisher, director of auto testing for Consumer Reports. “All things being equal, if you put the same powertrain [engine and transmission] in a vehicle that is taller and heavier, you’re going to get better fuel economy out of the car than with an SUV.”
A comparison by The Associated Press of the 10 top-selling 2019 SUVs and comparable cars with similar gasoline powertrains found that the cars beat the SUVs in mileage in all cases, in several instances by 14% or more. The comparisons were between two-wheel-drive vehicles.
Detroit’s Big Three automakers have stopped making many of their sedans and compacts as buyers shift dramatically toward SUVs and trucks. But the companies said they would be ready with more efficient gasoline-powered SUVs as well as hybrid and electric utilities if fuel prices spike.
About 70% of new vehicle sales in the U.S. are SUVs and trucks and 30% are cars. The ratio was about 50-50 just six years ago. Buyers are opting for higher seating, more space to haul people and goods, all-wheel drive for better performance in bad weather, and the ability to tow heavier items.