Auto Company CEOs v Fuel Economy



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Auto Company CEOs v Fuel Economy I just read an article on Newsmax about a meeting that President Trump held with the various CEOs of the Nation's largest automobile manufacturers and quite frankly, if the report is true, it wasn't good.


The report was mostly based on a quotes from Ford CEO Mark Fields who estimated that current fuel economy standards could put 1 million US jobs at risk.  It appears that Fields along with GM CEO Mary Barra and Fiat Chrysler CEO Sergio Marchionne did not ask for fuel economy standards to be eliminated but they did want them to "take into account consumer demand". 


One of the most disturbing piece of the article was that these CEOs, while not asking for CAFE rules to be set aside altogether,  appear to be asking for a single set of rules for the nation.  What that means is that they are requesting that the Trump Administration remove the ability of California to make its own rules when it comes to cleaning up the air.  The EPA has already dropped hints that it intends not to renew the waiver that allows California to do it.  This will also affect the 13 other states that have adopted the California rules.


The waiver was originally granted to California because it has the worst pollution problems in the nation.  In an attempt to clean up the air, especially in Southern California where the air in the LA basin is the worst in the nation, CARB introduced the ZEV Mandate in 1990.  This mandate has been modified over the years but requires car manufacturers to sell a certain number of zero emission vehicles each year.  The car makers have been trying to get this rule overturned ever since it was implemented and have managed to get it weakened several times but have never managed to kill it.  This time they may finally be able to get their wish at a time when zero emission vehicles are going to be key to their survival.


This could lead to a very interesting situation.  lf California has to finally scrap the ZEV mandate there are plenty of things that they can do to promote sales of plug-in vehicles in the state. 


First they can make regulations such as ZEV only lanes of state highways.  Things like allowing ZEVs in the carpool lane on interstate highways with a single person also require a waiver from the Federal government and I full expect that waiver to be cancelled too at some point.  That would mean that ZEVs would no longer be able to use the carpool lane solo on interstate freeways.  State routes though are a different matter and could theoretically be modified by the state of California without Federal approval.


Most of the load however could be carried at the city level.  For example the state and municipal fleets are quite large so if they began insisting that the cars they buy come with a plug then the carmakers are going to have to respond or risk loosing a big chunk of business.  I'm sure Tesla would be quite happy to step in and start supplying California state and city fleets with cars if Ford, for example, decided to stop making plug-in cars.


Cities could also take the London approach by setting congestion charges and making ZEVs exempt or much cheaper to access the congestion zone.  Imagine if you had to pay $20 per day to drive your SUV to your office in down town San Francisco while the guy with the Chevy Bolt gets to drive there for free.  At some point the ZEV becomes a no-brainer.


In the end, it is likely that cuts in CAFE standards, and the removal of the waiver allowing California to make their own rules will end up backfiring on the Automakers.  The rest of the world is going ahead and making stricter and stricter fuel economy standards, if the US carmakers don't respond they are eventually going to die out and that will cost the US a lot more than 1 million jobs.


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