The Trump Administration issued a proposed rule yesterday, outlining several options for revising fuel economy standards put in place by the Obama Administration in 2012. If adopted, the proposal would cap fuel efficiency requirements at the 2020 model year level of 35 miles per gallon (mpg), instead of letting them continue to rise to about 50 mpg in 2025, as currently required. This would signify a major policy shift and have ramifications that impact auto manufacturing AND auto retailing.
The proposal, written jointly by the Environmental Protection Agency (EPA) and the National Highway Transportation & Safety Administration (NHTSA), also aims to strip California of its Clean Air waiver, which enabled the California Air Resources Board (CARB) to create the California Low Emission Vehicle (Cal LEV) rules in 2009. Those rules have since been adopted by 16 additional states (including New Jersey), representing 40% of the nation’s automotive sales.
The Cal LEV rules mandate a certain percentage of electric vehicle (EV) and zero emission vehicle (ZEV) sales each year. CARB fuel efficiency guidelines are more aggressive than the emission rules in place at the national level, hence the Trump Administration’s effort to strip the State of the waiver. California and the other ZEV states are expected to dig in for a prolonged legal fight that will likely drag on for years. This will only serve to prolong the uncertainty and make it difficult for manufacturers to plan future investment in and production of EV product.
There Is A Growing EV Market
New car dealers want to sell what consumers want to buy and they recognize there is a market for EVs and ZEVs. How big and how fast the market grows relies on many factors. If the Trump Administration’s proposed rules are implemented or the challenge to California’s waiver is successful, it will impact the size and timing of growth in the EV market. But automakers have already invested tens of billions of dollars in EV technology and want to recoup that investment in the U.S. and other parts of the world.
Even without the CARB mandates, there IS a growing interest in electric vehicles and other clean vehicle technologies. While changing the rules may reduce the urgency and political will to invest in incentives and infrastructure, automakers will continue to respond to the global market demand for EVs. That means dealers will continue to be expected to order and retail existing EV product, as well as the dozens of new vehicles already in the pipeline and scheduled to hit the market over the next few years.
If adopted, this rule could significantly change the automotive retail market in New Jersey by dramatically shrinking the number of vehicles that would need to be partially or fully electric in order to meet emissions requirements. In the meantime, New Jersey continues to operate under the Cal LEV rules.
Unless, or until, a definitive change occurs, auto retailers will continue working to knock down marketplace barriers to EV and ZEV adoption. Dealers will press public policy makers to develop and implement programs that create incentives for consumers to buy EVs and build an infrastructure to support a growing EV market.