As widely expected, today in Washington D.C the Trump Administration and the EPA put forth a proposal to roll-back Obama-era fuel economy and emission standards for automobiles. The White House proposal essentially freezes fuel economy standards at 2020 levels and eliminates the stretch targets for fleet-average fuel economy in the U.S. to reach near 50 mpg by 2025. In a statement, the EPA noted, “Our proposal aims to strike the right regulatory balance based on the most recent information and create a 50-state solution that will enable more Americans to afford newer, safer vehicles that pollute less. More realistic standards can save lives while continuing to improve the environment. We value the public’s input as we engage in this process in an open, transparent manner.”
As today’s announcement by the administration is likely to spark a prolonged battle with, among others, the California Air Resources Board, we know this story will be with us for months to come. The Cox Automotive team from Autotrader and Kelley Blue Book will look to provide insight and data when available. Below is commentary from a few of our analysts, reflecting on today’s announcement.
From Karl Brauer, Executive Publisher of Autotrader and Kelley Blue Book:
This is a huge shift in regulatory oversight, and while it initially looks like a benefit for automakers, it will likely add a level of uncertainty none of them want. Producing and selling automobiles is a long-term process. It requires long-term planning that can’t easily be modified without costing car companies a lot of money. Government policy changes are similarly protracted, often requiring years to resolve. This combination will keep courtrooms busy and boardrooms nervous for the foreseeable future.
From Michelle Krebs, Executive Analyst of Autotrader:
This was a predictable move, as the current administration has been working hard to dismantle Obama-era regulations across the board. And while there’s little demand today for smaller, more-efficient or electrified vehicles in the U.S., as gas prices remain low, these lower fuel economy targets proposed by the administration will likely spark an unwanted war between Washington and the California Air Resources Board. While few stakeholders were happy with the tough targets in the current regulations, unraveling those standards will likely be even more painful.
Rebecca Lindland, Executive Analyst, Kelley Blue Book:
While many environmentalists will see this move as an attack, the reality is sales of hybrid and electric vehicles are not growing, even with incentives on the vehicles and home chargers and the like. If and when consumers demand more fuel efficiency from their vehicles, or we finally get a noticeable gas tax, OEMs will build them. With that being said, I do believe Gen Z – and especially the youngest ones – will expect their vehicles to be electrified in some manner, so demand may come in the next 10-15 years. A smart OEM will continue to develop EVs and hybrids, and, if the administration gets its way, do so without the pressure to meet an unrealistic regulatory statute.
If you would like to speak to any of our experts and analysts, feel free to contact us.