Auto Analysts See Fuel Efficiency Moving Forward Regardless of White House Decision

Even if the Trump administration rolls back the Obama administration’s 2022-25 fuel economy targets, they may eventually fall in place through other market forces, auto analysts say.

Consumer demand for fuel-efficient vehicles and aggressive emissions targets overseas may be more important than decisions by President Donald Trump. The president has directed the U.S. Environmental Protection Agency and National Highway Traffic Safety Administration toward potentially softening rules in favor of automakers’ pleas. They would be gaining more time to reach that level of efficiency, analysts say.

The Europe and China have similar emissions regulations coming up soon. California and nine other states following its zero emission vehicle mandates will have a similar effect.

If Europe and China continue tightening their rules, “the U.S. might become an outlier,” American Axle President Mike Simonte said to Reuters on Thursday.

Automakers see demand, but don’t want to face the pressure and cost of hitting aggressive federal targets well ahead of market demand.

“We are not seeking a rollback in any way. We just want to have a conversation around the levels we want to achieve,” said Bob Shanks, Ford Motor Co.’s chief financial officer.

California and nine other ZEV states, including Oregon and eight in the northeast, are expected to stay with their targets. These states make for nearly 30 percent of U.S. auto sales.

Automakers worry that it will create a “two-tiered” set of regulations to have national fuel economy rules clashing with California’s standards.

The regulatory divide could create a “two-tiered environment with two sets of regulations,” said Mark Wakefield, managing director of AlixPartners’ automotive practice. This “could drive costs higher if automakers have to build two versions of the same vehicle to meet the two different standards.”

The U.S. pulling back on emissions targets could also make it tough for them to export vehicles to countries that do have them in place, according to Kristin Dziczek, director of the Center for Automotive Research’s labor and industry group.

“I don’t think we’re going to see a rollback,” she said. “At most, I think we may see a slowing of the timetable” for tougher fuel economy rules to be adopted in new vehicles sold in the U.S.

If China keeps moving forward on electric vehicle sales, it could impact automakers global planning and financial backing.

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AlixPartners’ Wakefield said it could lead to “some movement of investment from the U.S. to China, especially as the latter market continues to grow.”

Morgan Stanley analyst Adam Jonas thinks that government regulations would come in third as a driver for fuel-efficient vehicle, behind consumer preferences and the direction of the impact of technology.

UAW President Dennis Williams would like to see automakers avoid focusing heavily on pickups, SUVs, and crossover. Consumers do value fuel-efficient vehicles, he said.

“The automakers shouldn’t make the mistake of sliding backward,” Williams said. “We’re here to protect our (union) members, but we understand that in doing so we also have to look at the future.”

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