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Automakers might be forced to mass-produce EVs in the United States

Tesla Model S on the production line at the company's Fremont factory. Source: Steven Jurvetson CC 2.0

EPA’s new fuel consumption rules would significantly raise fleet requirements for mpg

By the end of this week, the Environmental Protection Agency (EPA) is to put in place fleet requirements of 54.5 miles per gallon by 2025 for all automakers. The Agency has filed its midterm review of the fuel consumption standard early in order to force automakers’ compliance before the Trump administration takes over.

To comply with the ruling -which was made public last week- it is likely that automakers would have to start mass-producing EVs in order to offset the fuel consumption of gas-guzzling vehicles in their fleets, such as trucks and SUVs. This has been consistently lobbied against by every major car manufacturer in the country with the exception of Tesla.

The risk for the ruling now would be if the Trump administration was able to overturn it completely. Indeed, Trump’s prospective appointment of Oklahoma Attorney General Scott Pruitt to head up the EPA would suggest his eagerness to do so. Pruitt is a prominent climate change denier, and is currently in the process of suing the EPA for trying to enforce Obama’s Clean Power Plan – a strategy which would accelerate the deployment of renewable energy to meet the obligations of the Paris Climate Agreement.

According to the New York Times, a number of Pruitt’s complaints to the EPA have been directly drafted by energy industry lobbyists, who in turn have backed several of his re-election campaigns. By putting such a man in charge of the EPA, Trump is making clear that he will actively stand against any positions taken by the Agency under Obama.

 

Automakers’ direct appeal to Trump

In an attempt to subvert the ruling entirely, the Alliance of Automobile Manufacturers sent a letter to Trump’s transition team detailing why they believed the fleet requirements would not work and would in the end be damaging to the auto industry as a whole. The letter, which was sent within 48 hours of Trump’s election victory, claimed that it would be impossible to make EVs either cheap or efficient enough in order to both comply with the ruling and keep consumers interested in such vehicles.

There is also the risk of manufacturers simply churning out “compliance cars”, in other words, low-grade ZEVs designed with the sole purpose of meeting the fleet requirement that could damage consumer opinion of the vehicles ongoing.

Alliance CEO Mitch Bainwol stated: “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 in out-years.”

This would seem to contradict a recent study undertaken by the Union of Concerned Scientists which suggested that 67% of California residents and 55% of Northeastern US residents were interested in EVs and that over half of the respondents in each region wanted to see every car manufacturer to have such a vehicle on the market. It is worth noting, however, that only these two particularly EV-friendly regions were surveyed, and that the issue of price was not raised in the study.

Furthermore, the alliance complains that not enough notice of state-level legislation was taken into account by the EPA when drafting their ruling, such as California’s own significant ZEV mandate. Bainwol claims that the costs incurred by such state rulings means that the federal rulings become overly harsh when the former are not factored in.

However difficult it might be to determine to the relative fairness of such legislation, it is clear that a sort of triple alliance between automakers, energy firms and the government will make the promotion of clean energy particularly difficult, and as a result the marketing of EVs.

 

The importance of state legislation

The question of California’s ZEV mandate is demonstrative of the importance that individual state rulings will have on the subject of fuel consumption, especially if the federal government is no longer actively pursuing restrictions. The Californian law incentivises ZEVs by way of a credit system: for every ZEV sold in the state, a manufacturer gets a certain amount of credits. If a company doesn’t sell enough ZEVs, it will either be fined by the state or can buy credits from another automaker at a discount on the fine. Since at present not all automakers have a ZEV on the California market, those that do stand to make a small profit by gathering credits from ZEV sales.

Legislation such as this would at least mitigate some of the damage done to clean transport initiatives under a hostile administration, although it does of course mean that other states could go the other way and make ZEVs a less attractive option for consumers. On 11th January, Indiana filed a bill which would see EV owners taxed $150 annually to contribute to road maintenance. This sees Indiana following in the footsteps of 10 other states in the past year. Furthermore, the big coal-producing state of Wyoming has proposed taxing clean energy such as wind or solar at a rate of US$0.01/kWh, a major example of state-hostility towards zero-emission energy and transport.

Another ray of hope for ZEVs is Elon Musk’s newly forged relationship with Donald Trump himself, despite his campaign team’s previous attempts to discredit the Tesla CEO. If, as Musk claims, he can bring Trump round to seeing EV production as a huge potential reservoir for US jobs, the administration’s attitude may change. The upcoming Tesla Model 3 is likely to earn the title of “most American-made” car of 2017, usurping the 2016 holder , the Tesla Model S.

It is nonetheless a wise decision by the EPA to make its ruling now if it wants to have a lasting impact on ZEV legislation. For one thing it will be far more difficult for Trump or Pruitt to reverse an already-in-place mandate than it would be for him to nip a potential one in the bud.

Furthermore, leaving the matter to various and diverse state governments or hoping that Trump’s opinions might soon be swayed in favour of ZEVs is hardly a secure approach. What the next four years will bring for ZEVs in the US may be unclear, but continued incentivisation will no doubt be important to keep the industry healthy.

 

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