Cocaine and Cars
Many Americans were raised on the anti-cocaine myth that lab rats would self-administer cocaine, if given the option, to the point of starvation and death. The facts are somewhat less stark. Research has actually shown that rats, tethered alone in a small plastic box with no distractions, trained to inject cocaine and connected to an IV feed of cocaine will fatally self-administer the drug.
This thought came into my mind as I read the report of the Association of Global Automakers and the Alliance of Automobile Manufacturers asking new Environmental Protection Agency Administrator Scott Pruitt to "withdraw a decision made in the Obama administration’s final days that upheld light-vehicle greenhouse gas emissions standards through 2025," according to a Bloomberg report.
https://www.bloomberg.com/news/articles/2017-02-22/automakers-ask-trump-s-epa-boss-to-toss-obama-mileage-decision
In separate letters the two organizations asked the EPA to withdraw the agency's determination that greenhouse gas emissions standards that took effect in 2012 should remain in force through 2025. The two organizations base their request on procedural grounds that the National Highway Traffic Safety Administration had yet to complete its work on setting fuel economy standards.
The Bloomberg report says the objections are rooted in the auto industry's "campaign to shape efficiency regulations that they say are overly demanding amid cheap gasoline and tepid demand for the most fuel-efficient vehicles, and could jeopardize industry jobs...The EPA’s decision followed a review that began last year to determine whether the rules from 2022-2025 were feasible. Automakers say it was unfairly cut short by the Obama administration."
Bloomberg further notes: "In 2011, automakers agreed to the 2025 efficiency rules in a landmark deal brokered by the Obama administration to boost fuel economy to a fleet average of more than 50 miles per gallon by 2025. The agreement aligned tailpipe greenhouse gas limits set by the EPA and California’s Air Resources Board with fuel economy regulations governed by the NHTSA."
Car makers are fond of blaming the government for their woes. This is yet another case. The Detroit Three - Ford, General Motors and FCA - make handsome profits selling SUVs and pickup trucks. Strong sales for these vehicles, which now account for more than 60% of North American vehicle sales, do not help these organizations meet corporate average fuel efficiency standards (CAFE) but they do boost the bottom line.
You might see a competitive advantage for the membership of the Association of GlobalAutomakers in relaxing federal fuel efficiency standards. If the Detroit Three are freed to pursue profitable SUV and pickup sales in an unfettered manner, their focus on passenger cars is likely to be diminished even further from its already increasingly attenuated state.
Less attention to small and mid-size passenger vehicles means more business for import brands (who also manufacture domestically) and an enhanced competitive position. Next thing you know, the passenger vehicle market is sewn up by import brands and the Detroit Three are stranded on their SUV and pickup dominated island just as the industry pivots - in the 2022-2025 timeframe - to electric, self-driving and shared transportation focused around passenger vehicles.
It's sad that the Alliance of Automobile Manufacturers and the Association of Global Automakers feel that the negotiated and agreed to fuel efficiency requirements from the Federal government are onerous and unreasonable. The National Resources Defense Council points out that the regulations, which are now aligned with the California Air Resources Board's own, are actually working and are saving consumers thousands of dollars a year.
Car makers frequently claim that they are just trying to give consumers what they want. The reality is that car makers spend billions of dollars TELLING consumers what they want. Car makers don't know what consumers want and, often, neither do consumers. This is why there is a role for the government.
Given the societal impacts of vehicles from greenhouse gas emissions to highway fatalities and congestion to global energy and foreign policy, it's clear that car makers do not operate in a vacuum. The choices of automakers as to what kinds of cars to make have consequences, intended and otherwise.
The reality is that car makers are like the aforementioned rats in the small plastic cages. The question is whether it is in the interest of the government or the country to let these rats mainline/self-administer SUV and pickup production or whether there is a public interest in coaxing them into making small/mid-size passenger and zero emission vehicles --- maybe even for their own good.
Left to their own financially oriented decision-making processes, car makers would rationally choose to make SUVs and pickup trucks exclusively and electric vehicles be damned. Instead, the government has created a framework to distract the car makers with incentives and rewards and regulations for making electric vehicles and passenger vehicles.
Even with a stringent regulatory regime one might argue that it took a Tesla Motors to prove the viability of a mass market electric vehicle. Car makers are grudgingly responding to the competitive threat - while letting it be known that they are losing money on every model they sell.
At the same time, every electric vehicle sold makes possible the profitable sale of a pickup or SUV. The system works.
Car makers will be thankful for the regulatory guidance especially as import brands and, soon, Tesla begin moving more aggressively into the SUV and pickup space.
https://electrek.co/guides/tesla-pickup-truck/
Even if Administrator Pruitt were to defer the EPA guidelines, California's requirements related to zero emission vehicles - which have been adopted by nine other states - will remain in force. Time after time the auto industry has claimed CAFE targets are unreasonable and unreachable and each time the industry has proven itself wrong. I like extending deadlines as much as the next guy - but in this case lives and the survival of the domestic industry and even foreign policy objectives around energy independence are at stake.
As for me, personally, the policies around fuel efficiency have had an impact on my household as each of my three sons has opted for small fuel efficient cars: Ford Fiesta, Chevrolet Cruze and Honda Fit. The fuel efficiency of these cars is nearly twice the fuel efficiency of cars when I was their age. The dealers that sold these cars to my sons crabbed and complained the whole time over the profit margins - but they were happy to have the business. Thank you, EPA...and Ford and Chevrolet and Honda.
Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk
Meta Strategy Consulting
7 年If EPA accepts this demand, this is great news for European, Korean, Japanese and Chinese auto industry: clean auto technology at scale will slow down in the USA and therefore with the big 3 while strong regulations will continue to push new technologies in these other countries and their OEMs. China is already the #1 country for EVs.
Carhartt - Corporate Purchasing Manager
7 年Ahhh...margins and the need to focus on the electric vehicle! The reason why FCA made the decision to not continue producing small and midsize vehicles.
Advisor, Board Member | Helping leaders, founders, and investors navigate the #MobilityRevolution | #SmartCities #SmartMobility | Teacher, Learner, Keynote Speaker (on 5 continents)
7 年Harsh, and absolutely valid comparison Roger C. Lanctot. Time for the OEMs to go cold turkey.
Principal Analyst for Automotive Market Analysis at TechInsights
7 年European thoughts here: Governments here have understood it has to use a "carrot and stick" approach when it comes to persuading consumers to think about fuel efficiency and limiting harmful emissions in their vehicle purchases. For the UK, there is the showroom tax in the first year's registration and an annual excise duty, both based on how much CO2 the vehicle emits. Company car tax is based on CO2 emissions, too. Then there is the high tax on petrol/gasoline fuel - the thirstier the car, the costlier it is to run. If only there is a surcharge for NOx and PM emissions that could take those old diesel cars and vans off London's streets... The result of this has been a stronger bias towards fuel efficient and low emitting new vehicles than in the US. The problem with the US CAFE is that the onus is mostly on the OEMs (to comply with mandates from increasing light truck sales) and not on the consumer - which is the gist of Roger's argument. Another problem is that the main consumer incentive in the US is the tax credit in return for purchasing EVs, which doesn't give much variety to consumers who can't afford or don't want a Tesla. I recently bought a new car in the hope I can spend less money on fuel and tax, but I also wanted a car that had more poke for overtaking. The result wasn't a slow and ugly hybrid nor a monstrously quick and cripplingly expensive-to-run muscle car, but a compact hatchback that is fun to drive - but is lighter, has a smaller turbocharged engine and is equipped with a stop-start/micro-hybrid system with added efficiency against my old car. Every consumer has their own decisions to buy a new car. If Americans had the same dilemma as me, the cheap gas and lack of incentive (except for owning a big, expensive electric sedan with charging infrastructure), then of course they would buy the CO2-belching muscle car.
Please Read & Review Jimi & Isaac books for kids. Solves problems. Invents Stuff.
7 年"Car makers don't know what consumers want and, often, neither do consumers. This is why there is a role for the government." ----Say what? It's the government's job to tell us what we want? Whoa. Dude. Take a breath. Your kids bought great, simple, gas-powered cars that would disappear under the new rule. Tesla proved they can sell high-end toys for the rich paid for by subsidies paid by the poor. That doesn't mean that there's a market. And using CARB and NRDC as authentic sources is sad. Both organizations are as corrupt as they come - choosing sensationalism over honest debate every time. They make enemies and fund-raise off the conflict. Please don't help them in their quest.