U.S. president-elect Donald Trump received a letter from the Alliance of Automobile Manufacturers November 10 requesting he adjust regulatory statutes on fuel economy and emissions standards in an effort to quell rapidly increasing new vehicle prices.
The alliance, – a group of foreign and domestic automakers convened to influence industry development – says there is a direct correlation between the ramping up of regulations and an increase in new vehicle pricing due to the advanced software and hardware that must be developed, manufactured, and installed in order to be compliant with increasingly strict standards.
In the November 10 letter obtained by Automotive News, Alliance CEO Mitch Bainwol emphasized regulation reform is “imperative for economic growth” within the industry.
“As car prices rise, it becomes vital to look at the full cost of regulatory initiatives,” said Bainwol.
“Well-meaning regulatory action risks increasing compliance costs to the point that additional safety and fuel-efficiency technologies put new vehicles out of financial reach of the average new car purchaser.”
A significant amount of profit is at stake, argues Bainwol, and consumers stand to win or lose depending upon whether regulation reform is successful, or plows ahead in line with President Obama’s aggressive policy-making.
“Regulatory friction is already occurring, driving up vehicle costs, and will become even more counterproductive as the regulatory requirements become more stringent in future model years,” wrote Bainwol. “Potentially billions of dollars” are at stake, he added.
Smog-forming pollutants from passenger cars have been all but eliminated; according to the alliance, vehicle exhaust pollutants are down over 99 percent since the 1960s. New Environmental Protection Agency and other regulatory policies are aimed at mitigating the remaining one-percent of exhaust pollutants from internal-combustion-powered cars, both gasoline and diesel.
The combination of highly efficient modern vehicles and decreased gasoline prices have stagnated hybrid and electric vehicle sales in most markets, thus putting additional pressure on automakers to turn a profit by way of price hikes on the conventional vehicles they sell.
“The combination of low gas prices and the existing fuel efficiency gains from the early years of the program is undercutting consumer willingness to buy the vehicles with more expensive alternative powertrains that are necessary for the sector to comply with the more stringent standards,” concluded Bainwol.
The next opportunity to effect change in the regulatory process comes mid-year 2017, when the next EPA administrator will determine whether fuel efficiency and emissions standards are appropriate, or should be ramped-up or dialed back.
A binding, final determination is due by April 2018—though Trump could wield his presidential powers to effect change by executive order, following in the footsteps of his predecessor, who has executed some 235 executive orders to date.
The letter to president-elect Trump also touches upon autonomous vehicle technologies, asking, “how do we save the most lives by promoting the rapid deployment of these [autonomous] technologies while also maximizing public safety and building public support for their adoption?”
The conglomerate of automakers says it has recommended regulatory reform out of a commitment to keeping cars safe, clean and affordable; further, it pledged to work with Trump to “achieve the great social outcomes that are within grasp.”
The alliance consists of automakers from across the world including BMW, Fiat-Chrysler, Ford, GM, Jaguar-Land Rover, Mazda, Mercedes-Benz, Mitsubishi, Porsche, Toyota, VW, and Volvo.
When contacted by Automotive News, the EPA declined to comment.
Trump’s potential impact on the Canadian automotive sector
The impact of Trump’s policy-making on the Canadian automotive sector is an area of concern for many Canadians, and will be closely monitored by Canadian industry and government.
Should Trump’s economic policies succeed in rejuvenating U.S. industry and spurring economic growth, it is predictable that consumer demand for new vehicles will rise.
An increase in U.S. economic growth and vehicle sales will not necessarily benefit Canada’s auto sector, however, if Trump enacts new trade policies that are heavily protectionist of the U.S. economy.
Trump has publicly slammed the North American Free Trade Agreement as “the worst trade deal ever,” and it can be assumed that tilting a new trade agreement in favour of U.S. interests will present new challenges to Canada’s economic growth, including within the automotive industry.
Trump is also in opposition to the highly controversial Trans-Pacific Partnership—a trade pact which was negotiated in secret, and would open unfettered free trade between a dozen Pacific Rim countries, including Canada.
If Trump is successful in creating significant economic growth, the net impact on Canada’s economy could still be positive, despite new or heavily modified Canada-U.S. trade agreements.
Trump’s presidential inauguration is to be held on January 20, 2017.
(Automotive News with photo from Huffington Post)