DETROIT — Just days after Donald Trump won the 2016 election, the trade group representing major automakers in Washington called for reconsideration of the Obama administration's fuel-efficiency standards in the face of low gas prices and large capital investments.
Now, the industry is at odds, with General Motors Co. and Fiat Chrysler Automobiles NV supporting the Trump administration's national standard that rolls back the requirements. Meanwhile, Ford Motor Co. has backed the efforts of California and other coastal states to impose stricter standards that would reduce tailpipe greenhouse gases — an effort Democratic challenger Joe Biden has encouraged with plans to reverse Trump's pullback.
"You have these big splits on those aligned with California, and those aligned with Washington," said Kristin Dziczek, vice president of industry, labor and economy for the Center for Automotive Research in Ann Arbor.
"One of the concerns is under the current administration you've seen deregulation and that the pendulum could swing back hard in a Democratic administration. That affects products you're planning seven to eight years out. It could mark a big sea change of events like electrification."
The next four years promise to deliver the most sweeping technological shift in the auto industry since Henry Ford's moving assembly line more than 100 years ago, as automation, connectivity and electrification go mainstream. Electrifying lineups requires billions in investments that carry significant implications for jobs, operations and communities even as consumer acceptance remains largely uncertain.
That makes the federal government's influence on the marketplace even more critical — depending on who occupies the Oval Office come Jan. 20. Biden's plan calls for investments in charging infrastructure, rebates to consumers for purchasing more fuel-efficient vehicles and incentives for manufacturers of electric vehicles. He envisions a zero-emission future in the coming decades and a transition away from the oil industry.
A strong supporter of the oil and gas industry, Trump has resisted expanding subsidies for electric-vehicle purchases. Tesla Inc. and GM electric vehicles no longer qualify for the federal $7,500 subsidy. Both Trump and Biden say they would incentivize companies who return manufacturing from abroad.
"It's very tough to sell electric vehicles at $2 a gallon for gas," said Warren Browne, a former GM executive who consults automotive suppliers and is an adjunct professor at Lawrence Technological University. "If the hill was steep at $2, the hill will be much steeper under a Trump administration than under a Biden administration."
A steeper hill, he adds, would challenge the survival of electric-vehicle startups, make it difficult for traditional automakers to gain on their investments in electrification and help Tesla to continue to dominate the segment. Meanwhile, China and the European Union are more aggressively regulating the industry's emissions, which could position them as the hubs of electric innovation.
Trump rolled back Obama-era fuel economy standards that the overall industry has not met since 2015. He reduced the required annual fleetwide average mpg for model years 2021-26 from 5% to 1.5%. Automakers are required to have a fleetwide average of 40.4 mpg by 2026 under the new requirements, down from an average of 46.7 mpg for cars and trucks by 2025. Easing penalties, according to the industry, also has saved at least $1 billion in annual compliance costs, though a federal appeals court in August reversed that action.
California and 22 other states, including Michigan, have sued the federal government over the Trump administration's effort to roll back tougher gas-mileage rules. California Gov. Gavin Newsom last month ordered a ban on the sale of new gas-powered vehicles by 2035, and other states could follow suit. Meanwhile, West Coast Democrats are pushing a similar mandate at the federal level.
"You can't just mandate electric vehicles and think people are gonna buy them," said U.S. Rep. Debbie Dingell, D-Dearborn. "They're not going to if you don't have the infrastructure, and they're not affordable, and people don't know they're safe, and they don't know if they've got the range."
The Alliance for Automotive Innovation, which represents automakers in Washington, has said bans and mandates are not the most effective way to build a market and that its members are investing billions into the electric segment with offerings expected to more than triple by 2025.
"We are committed to a cleaner, safer, smarter future, and we understand the importance of working with all parties to achieve these goals," John Bozella, the alliance's CEO, said in a statement.
After GM announced its vision for a world with "Zero Crashes, Zero Emissions and Zero Congestion," GM CEO Mary Barra stressed the importance of federal standards rather than a state-by-state patchwork of rules for federal electric and zero-emission policies.
Jim Long, CEO of the Motor & Equipment Manufacturers Association, agrees. A patchwork would "create an inefficient set of challenges to comply with the potential of 50 or more different regulations."
"It can't be a patchwork," he said. "It's got to be a national federal regulation and policies that support that. And there's a lot of work to be done with the infrastructure and the technology and so forth to enable that mandate to actually live."
Automakers are focused on how to get more consumers interested in electric vehicles. Electric vehicles represented less than 5% of new sales last year. Higher prices because of their batteries and insufficient charging points have challenged consumer adoption.
Case in point: The sticker price of the edition of the GMC Hummer EV truck unveiled last week is $112,595. On the lower end, GM offers the Chevrolet Bolt starting at $36,620.
GM is spending $20 billion on electric and autonomous vehicles through 2025 with 20 fully electric nameplates in its global portfolio by 2023. And it just announced plans to transition a third U.S. manufacturing plant to electric vehicle production.
Ford is investing $11 billion on the technology. Fiat Chrysler, poised to consummate its transatlantic merger with Groupe PSA of France, plans to spend $10.5 billion on electrification efforts through 2022.
China and the European Union have been more aggressive in their emissions-reduction targets. The EU in January even accelerated its 2030 goals by increasing emission-reduction targets to 55% from 45% — which FCA CEO Mike Manley last week said requires "political and practical support" in the face of risks associated with the novel coronavirus pandemic.
"It matters where the rest of the world is going, too," Dziczek said. "All the automakers are down to a handful of vehicle patterns. The U.S. market is a bit of an anomaly already — more so, perhaps, in a second term of Trump, and we may become more aligned with the regulatory global regimes in a Biden administration."
Biden says he would add 500,000 charging stations and has touted offering rebates for those looking to swap out older vehicles for more fuel-efficient ones — similar to the "cash for clunkers" plan employed by the Obama administration. Grants and loans could help manufacturers retool and build new factories to make electrified vehicles and their parts. His plans, Biden says, will create 1 million jobs in the sector.
The United Auto Workers endorsed Biden. But because electric vehicles can require hundreds of fewer parts than their internal-combustion and diesel counterparts, they need fewer people to build them.
"This process is going to take a long time, and we can walk and chew gum at the same time," said Brian Rothenberg, the union's spokesman. "The UAW is committed to combustion engines and as we transition to electric vehicles, we are committed to making those new jobs good-paying jobs in the U.S. that have good benefits and union wages. It's not an either-or. It's going to be a long transition process."
Being able to compete with foreign countries and export vehicles could help stave off workforce declines, Browne added: "Because of the fewer parts and components, you'll have fewer jobs unless you can expand your customer base. China, France, Germany all are supporting electrification."
Trump in 2016 had campaigned on removing the North American Free Trade Agreement for which Biden voted while in the Senate. Trump negotiated the U.S.-Mexico-Canada Agreement that went into effect in June and requires automakers to produce cars with 75% of parts originating from the U.S., Canada or Mexico to qualify for duty-free treatment, up from 62.5%.
The Motor & Equipment Manufacturers Association supported the USMCA.
"We have been an active advocate and worked very closely with the administration to find language that would help be a catalyst for not only jobs but greater competitiveness globally for U.S. manufacturers," Long said.
Biden has said he would establish a 10% tax credit for certain investments that spur more domestic manufacturing jobs. Profits made overseas would face an additional penalty surtax.
Trump's second-term agenda also mentions a "Made in America" tax credit and incentives for manufacturers moving from China, but does not include specifics.
One of the manufacturing association's focuses going forward is trade and trade certainty. Members have struggled to follow trade policies, specifically the trade rules on steel and aluminum and the tariffs on China and other countries.
"That makes it very difficult for U.S. manufacturers to invest in manufacturing or technology," he said. "And both of those are critical to drive jobs and U.S. competitiveness."
