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Trump Expected To Lower MPG Rules, But Automakers Still Race To Build More EVs And Hybrids

This article is more than 6 years old.

Automakers are expecting the Trump Administration to propose lightening fuel economy standards at the end of March, potentially making it easier to keep selling more trucks and SUVs, which carry fatter profits.

But even if Trump’s National Highway Traffic Safety Administration moves to ease the standards as expected, automakers will keep investing in battery and fuel-cell technology to lessen the automobile’s dependence on the internal combustion engine because large markets like Europe and China continue to establish CO2-reducing regulations, and future White House Administrations and Congresses will likely move to re-instate tougher rules.

NHTSA Acting Administrator Heidi King said in an interview Tuesday with Bloomberg at the Detroit auto show that the coming proposed rule would be released on March 30. Under a process set during the Obama administration, the proposal would cover model years 2022 through 2025.

"It will be a proposal that will stimulate dialogue, robust listening to the data and the stakeholders that should inform a decision before we go to a final rule stage," King told Bloomberg.

The auto industry has lobbied the Trump Administration to revisit the fuel-economy standards because persistently low gas prices are driving consumer demand for pickup trucks and SUVs, which get far worse gas mileage than small and hybrid passenger cars. Trucks, SUVs and crossovers account for about two-thirds of new-vehicle sales, compared with one-third going to four-door and two-door passenger cars.

Automakers in 2011 agreed to coordinated rules by the EPA, NHTSA and the California Air Resources Board (CARB) that get stricter each year, culminating with a fleet average of more than 50 miles-per-gallon by 2025–though that equals 36 mpg in real-world driving.

Hybrid and electric vehicles last year represented just 3% of new-car sales, and the best-selling hybrid in the market, Toyota Prius, saw a precipitous sales decline. “As long as there are not gas taxes to keep gas prices high and demand for more fuel-efficient vehicles consistent, we are going to have a disconnect between consumer demand and government policy,” says Dennis Keene, an auto industry consultant.

Still, automakers are maintaining aggressive conversion of their lineups to battery-power and hybrids.

Volkswagen AG says it expects to sell up to three million battery-powered vehicles by 2025, representing about one-quarter of the vehicles it sells annually. Honda has set a goal of making two-thirds of its global sales hybrid, battery and fuel-cell by 2030. Mercedes-Benz says that every one of its models will have an electric version on sale by 2022.

“The regulations we face will drive the technology choices and commitments we make,” says FCA CEO Sergio Marchionne at the New York International Auto Show this week. The CEO of the Fiat and Chrysler group says that the European market is going to see electric vehicles grow faster than the U.S. because the European Union countries have adopted aggressive fuel economy and emissions rules with hefty fines for not meeting them. Marchionne also said he expects diesel to play a lesser role in Europe where it has accounted for more than 40% of new vehicles sales in most years.

Too, whatever the Trump Administration does to weaken fuel economy regulations, CARB is unlikely to go along with them, leaving automakers to still deal with California, the largest state in the union for new-car sales.

The Trump Administration has been on a deregulation tear since taking office. It has lightened regulations for coal, oil and gas companies, and chemical companies, making it easier for those industries to pollute and explore new sources of fossil fuels on land and sea previously preserved. The Trump Administration has also announced its intention to withdraw from the Paris Agreement, an agreement among 196 countries to reduce carbon emissions.

Because the U.S., under Trump, has become an outlier on policy directed at carbon emissions and climate change, most companies are maintaining their investments in new technology aimed at reducing carbon emissions.

The real benefit of more lenient emissions and fuel economy standards in the U.S. will be the ability of automakers to sell more trucks and SUVs in the short term, giving them more time to hit stiffer standards that will inevitably come later.

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