Trump’s fight with California divides automakers - Activate World

Trump’s fight with California divides automakers

GM, Toyota, Fiat-Chrysler, and others are now backing the Trump administration’s move to remove California’s power to impose CO2 rules — and by proxy mileage rules — that exceed federal standards. This is the latest twist in the standoff between Trump and California regulators over the Administration’s proposed weakening of federal auto-emissions standards set during the Obama administration. 

Lunchtime Conversations:

  • Toyota spent decades cultivating an environmentally conscious reputation by pioneering the first mass-market hybrid. How will this move affect their reputation as a green brand with consumers?  
  • Why are certain car manufacturers supporting less-aggressive environmental standards during a time of significant awareness of climate change issues? How is this a smart business and society strategy?
  • If you were CEO of an auto company, what considerations would you take into account in whether to support the Trump Administration or California? What decision would you make and why?

Noteworthy:

  • California is the nation’s biggest auto market, and about a dozen states follow its lead on emissions rules.
  • Volkswagen is betting heavily on electric vehicles in the wake of its diesel emissions scandal. Ford is aligned with VW, while Honda is already the industry’s most fuel-efficient carmaker.
  • GM doesn’t think California’s plan provides enough EV emissions credits to offset the sale of high-margin pickups it needs to finance its bets on future technologies like autonomous vehicles
  • Some foreign automakers are worried about angering President Trump, who is still weighing big tariffs on auto imports that could wreak havoc on their business.

Storyline:

Big automakers are divided over how to navigate White House efforts to upend mileage and carbon emissions policies. Where automakers stand largely depends on their future product pipeline and where they think the market is headed.

California has declared that it will go its own way and keep enforcing its stricter standards regardless of what the federal government does, pursuant to the Clean Air Act of decades ago that gave the state the power to write its own clean-air rules.

This summer, Ford, Honda, Volkswagen, and BMW struck a deal with California to follow more stringent standards that were closer to Obama’s. They decided to make peace with California’s demanding requirements because they would have rules to follow now instead of waiting to see the outcome of the Trump-California battle.

The auto industry started balking a few years ago at stringent Obama-era standards that extend through 2025, but they don’t like the draft 2018 White House plan to freeze the standards, and instead say there should be some level of annual increases.

Then last week, the Wall Street Journal reported that the Trump administration is backing off its plans to freeze fuel economy standards at 2020 levels and would instead consider a rule that mandates a small annual increase in fuel economy from carmakers.

Ironically, it is California that has produced the nation’s only significant market for all-electric vehicles because of its standards, adding to the pressure on automakers to turn over their U.S. fleets to battery power even though consumers in most of the rest of the country are not clamoring for EVs.

For the US auto industry, it’s another major headache alongside an ongoing trade war, slowing sales, and a rapidly changing market that is making it difficult to plan for the future.

Sources:  AxiosForbesLos Angeles Times, Vox

Photo by Saketh Garuda