This has the potential to make a huge change in the cars we'll be buying in the coming years.
We previously outlined how Trump’s dislike of regulation would eventually lead his administration to roll back on rules for many industries, especially the automotive sector. And now, Trump has made a trip to Detroit to announce just that. According to The New York Times, the president and his administration will begin the lengthy process of cutting away at the fuel economy rules put in place during Obama’s administration, complying with the plead to do so that was recently made by automakers.
The current regulations require automakers to work to hit an average fuel economy target of 54.5 miles per gallon by 2025 for cars and trucks sold in the US. These rules have already molded current vehicles on the road, with aluminum bodies, downsized engines, and hybrid cars being part of the various solutions automakers have been implementing in order to meet these targets. Billions of dollars have been invested on the part of the automakers to comply, but when Trump took office, the CEOs of various car companies petitioned the president to scale back on the regulations in order to save them from making investments to reduce fuel consumption.
Now Trump has promised to do just that, beginning a process that could see standards being replaced as early as April of 2018. As of now, automakers must comply with the current set of standards until 2021. Trump’s administration will specifically target the regulations in place between 2022-2025, the years that the rules become a lot more strict. This will obviously have many effects on the auto industry, enabling automakers to quit downsizing engines, curtailing horsepower, and pursuing electrification. On the other hand, it could have a set of negative implications as well. As outlined in a letter to the White House by Consumers Union, thirstier cars mean that consumers will be spending more on gas.
That increased cost will provide no benefit to consumers, making them pay more to travel the same amount of miles. Given how cheap the price of gasoline is, the effect may not initially be too drastic, however if the price of oil shoots up as it did in the years leading up to the crash of 2008, consumers would once again be saddled with gas guzzlers they cannot afford to drive and can’t sell due to lessened demand. A spike in oil prices would also affect automakers, which would be left with thirsty cars unsold on dealership lots while they scramble to reinvest in more fuel efficient models that consumers need. Last time the effect was great enough to force two of Detroit’s big three into bankruptcy and put a serious dent in the third.
And then, as the Detroit Free Press reports, there's the obvious effect of an increased dependence on oil and the simultaneous worsening of climate change. DFP also points out that the sorts of jobs that fuel economy regulations are bringing to Detroit are of the high skilled variety because they demand engineers and scientists who can work on the cutting edge of automotive technology to make the current crop of cars better. As noted by the LA Times, Trump’s push to roll back standards is unlikely to go unchallenged, with blue states with voracious appetites for cars like California pushing to keep the current California Air Resources Board (CARB) fuel consumption regulations intact, which have been adopted by 16 other states.
Automakers have previously mentioned that it’s not economically viable to produce cars for both CARB and non-CARB adopters, meaning if these states win the right to continue forcing automakers to adhere to the law, cars could keep moving along the path to fuel efficiency. Given that European regulations will stay the same, it’s clear that there is plenty of incentive for automakers to continue to push for efficiency. The environmental agenda still has its teeth, but the trump card that Trump has just played, like his many other plays, is a wild card that will toss up the industry, leaving it unclear as to how things will look when it lands back on its feet.