- Carlos Barria/Reuters
- President Trump has demonstrated a reliable ignorance of the US auto industry.
- His latest dustup with California over fuel-economy and emissions standards is the most recent example.
- Auto consumers and automakers both want more fuel-efficient cars – and Detroit is horrified at the prospect of having to build vehicles for California and the rest of the US on different standards.
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The US auto industry has been staring down a nightmare scenario with the Trump administration and California. And the President Donald Trump’s general ignorance of the car business has made matters worse.
Backtrack to the months right after the 2016 election and Trump’s unlikely win. Detroit moved fast to encourage the new Trump Environmental Protection Agency and Department of Transportation to revisit fuel-economy and emissions targets, which had been locked in during the waning days of President Barack Obama’s second term.
Detroit got a quick win. But California, which has a waiver to set its own standards, decided to go it alone. Sort of, as numerous US states follow California’s lead. This opened the unappealing prospect of US automakers having to manufacture vehicles to different standards.
In an effort to get ahead of the problem, a consortium of major car makers cut its own deal with California. According to Bloomberg:
The joint agreement involving California with Honda Motor Co., Ford Motor Co., Volkswagen AG and BMW AG had already been rejected by Trump’s Environmental Protection Agency. The deal announced on July 25 alongside the California Air Resources Board – eases the pace of annual efficiency improvements required under current Obama administration rules but is tougher than the Trump administration’s proposal to cap mileage requirements at 2020 levels.
Trump, of course, shared his thoughts on the deal via Twitter: “In California, they have a standard where the cars are going to have to be much more expensive and won’t be as good. If we can build a less expensive car that’s better, we like that.”
Trump is all wrong about California and cars
- Getty Images
This is wrong. The issue with California’s standards is less about vehicle cost and more about vehicle mix. The challenge for the Detroit automakers is that they’ve been making bank on SUVs and pickups, but meeting the Obama-era targets would have required more small vehicles, hybrids, and electric cars. The car companies plausibly argued that they didn’t want to be compelled to build these cars just to hit fuel-economy targets, when in reality consumers didn’t want to buy them.
Meanwhile, Detroit had already been proactively improving fuel-economy and lowering emissions in vehicles by introducing a lot of turbocharged four- and six-cylinder engines to replace older sixes and big V8s. The Big Three – Ford, GM, and Fiat Chrysler Automobiles – had also been looking to “lightweight” larger vehicles by using more aluminum in place of steel.
None of this made vehicles particularly more expensive, and for the most part, consumers responded favorably to the moves. It turns out that they liked the fuel-saving innovations.
Average transaction prices for new cars have been increasing, but that’s due to more fully-featured vehicles moving off dealers’ lots, along with stronger sales of SUVs, pickups, and luxury models.
The US market provides the best choice and value for auto consumers
But the upshot is that in the US market, consumers still have access to the best cars ever created, at extremely competitive prices. That would remain true in California, where motorists are actually accustomed to a higher cost of ownership thanks to the higher price of California’s specially formulated gasoline. (For what it’s worth, Californians have always been happy to pay more for their cars and their gas in order to preserve and enhance what is considered one of the world’s most spectacular climates.)
Trump is constantly braying about “fake news,” but what we have on display here is fake politics and fake business. A defining feature of the automobile over the decades has been steadily improving safety, reliability, and fuel economy. The industry is deeply invested in continuing this level of innovation.
Trump, however, would prefer a rollback to a time when tail-fined Cadillacs roamed Hollywood Boulevard getting 8 to 12 miles per gallon in the city.