by Coral Davenport and Jack Ewing (New York Times) Three of the nation’s largest automakers, Ford, General Motors and Stellantis, are strategizing with other car manufacturers on how to make a delicate request of President-elect Donald J. Trump: Don’t scrap the federal regulations that compel the industry to sell electric vehicles.
...
In fact, most automakers don’t love the more stringent rules Mr. Biden put in place. But they have already invested billions in a transition to electric vehicles, and fear that if Mr. Trump made an abrupt change as he has promised, they could be undercut by automakers who sell cheaper, gas-powered cars. They argue it would harm an industry that is a backbone of American manufacturing and employs 1.1 million people.
Lobbyists and officials from several car companies say the automakers want the Biden regulations to remain largely intact, with some changes such as more time for compliance and lower penalties for companies that don’t meet the requirements.
One wild card in negotiations is Elon Musk, the top Trump adviser and chief executive of Tesla, which accounts for half of electric vehicle sales in the United States.
In a previously unreported Nov. 12 letter to Mr. Trump, John Bozzella, president of the Alliance for Automotive Innovation, which represents 42 car companies that produce nearly all the new vehicles sold in the United States, wrote that in order for the auto industry to remain “successful and competitive,” it needed “stability and predictability in auto-related emissions standards.”
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Electric vehicle supporters had hoped that Mr. Musk would persuade Mr. Trump to retain the E.V. rules. But that seems unlikely; he is now poised to lead the Trump administration’s initiative to reduce regulations.
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Except for Tesla, most automakers still sell electric vehicles at a loss because they have not yet recouped their investments. They also need to sell at scale to bring down production costs, and while E.V. sales in the United States are still growing, the pace has slowed.
Still, virtually all auto executives expect electric vehicles to displace gasoline cars over time and if the American carmakers falter now, they risk being overtaken by carmakers from Europe and China.
Ripping up the pollution rules could imperil those investments and harm the American industry’s ability to compete globally, said analysts.
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“The worst thing of all for the automakers, even worse than a difficult regulation, is a back-and-forth swing every four years,” Ms. Brinley (Stephanie Brinley, an analyst for the Auto Intelligence service at S&P Global Mobility) said.
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But the automakers are treading with care, concerned that Mr. Trump might bear a grudge against companies that publicly opposed his first-term efforts to erase the Obama E.V. rules.
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Among Mr. Trump’s biggest grievances with automakers includes a 2019 legal agreement that four of the world’s largest automakers — Ford, Volkswagen, Honda and BMW — secretly struck with the state of California to reduce their tailpipe emissions according to stringent limits set by that state.
The move blindsided and enraged Mr. Trump, since it came as his administration was moving to weaken federal emissions standards and to revoke California’s legal authority to set its own rules. He appeared to seek revenge by opening an antitrust investigation into the automakers that signed on to the California deal. Later on, two more companies — Stellantis and Volvo — joined the companies that sided with California. All those companies remain bound to that deal.
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It is possible that the efforts by the carmakers could yield results, said Mike Murphy, a Republican strategist and chief executive of the EV Policy Project, an effort to end the partisan divide over electric vehicles.
“If the message is ‘mend it, don’t end it,’ that might get through,” Mr. Murphy said of the E.V. rules. “Trumpworld is a weird mix of grievance, instinct and transactional outlook. Despite what he says on the campaign trail, everything he says is written in pencil.” READ MORE
Related articles
- How Trump Could Kill Tesla’s Secret Profit Center: California’s Clean Air Act waiver may not be long for this world. (Heatmap)
- Auto worker wipeout: Why car companies are cutting thousands of jobs (Business Insider)
- Auto industry's shift toward EVs is expected to go on despite Trump threat to kill tax credits: If President-elect Donald Trump makes good on his threat to kill federal tax credits for electric vehicle purchases, it’s likely that fewer buyers will choose EVs (ABC News)
- Toyota breaks with rival automakers, urges changes to EV tax credit -- The company said it's proposing revisions to make zero- and lower-emission cars more affordable at a time when EV adoption is growing at a slower rate. (Politico Pro Energywire)
- Trump Can Get EVs Back on Track: Ditch the mandates and subsidies. Let consumer choice drive the market. (Wall Street Journal)
Excerpt from Heatmap: But if past is prologue, Trump’s policies could still hammer one of Tesla’s primary income sources: the emissions compliance credits the EV giant sells to other automakers.
That windfall comes from California’s Zero-Emission Vehicle Program, which sets ambitious ZEV production and sales mandates that other states can then voluntarily adopt. Automakers earn credits based on the number and type of ZEVs they produce; they can either put those credits toward meeting their annual targets under the law or, if they have an excess, sell them. Since Tesla is a pure-play EV company, it has always generated more credits than it needs, while most other automakers need to buy credits to meet their emissions targets. Last year, selling credits represented about 12% of Tesla’s net income, and so far this year, it comprises a whopping 43%.
Underpinning this whole regime is California’s Clean Air Act waiver, granted by the Environmental Protection Agency, which allows the state to set stricter vehicle emissions standards than those at the federal level due to the “compelling and extraordinary circumstances” it faces when it comes to air quality. During his first term, Trump sought to rescind portions of this waiver related to greenhouse gas emissions and the ZEV mandate, and his campaign stated that he will do so again. While the federal government’s comparably weaker emissions standards ensure that the credit market won’t disappear completely, eliminating the waiver would cause it — and Tesla — to take a major hit.
“Given that Tesla has no new major high-volume product that they’ve announced, not having access to these credits is only going to be harmful,” Corey Cantor, an EV analyst at BloombergNEF, told me.
...
Right now, California’s emissions targets are quite ambitious, and they’re poised to get even more so over the next decade, which would cause the credit market to heat up, too. With the introduction of California’s Advanced Clean Cars II program, 35% of all 2026 models sold must be ZEVs.
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Besides California, 11 other states, plus Washington D.C. have signed onto these regulations.
Under Trump, all of these goals are likely gone — though it’s probable that they wouldn’t have been met anyway. Based on total retail sales so far this year, no states are selling a large enough percent of EVs and hybrids to comply with California’s forthcoming standards — not even California itself, which CNBC reports is sitting at 27% EV and plug-in hybrid sales. Toyota came out and called these standards impossible to meet, but there’s no indication that California is backing down.
...
The waiver ordeal ultimately got tied up in courts, and California’s regulations ended up being inactive for just two-and-a-half years, until Biden reinstated the waiver in 2022. Litigation is still ongoing, however, with a suit from an Ohio-led coalition of red states expected to end up in the Supreme Court.
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“All states are affected by climate. [California]’s not unique in the way that it had unique air pollution problems,” Carlson (Ann Carlson, a professor of environmental law at UCLA) told me, explaining the argument Trump and red state allies will likely make.
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“The effect of an inexperienced administrator, combined with potentially freezing out or even firing some of the most competent and skilled economists, scientists, etc, could totally undermine the ability to do this in a way that is legally sustainable and fast,” Carlson told me. READ MORE
Excerpt from Politico Pro Energywire: Toyota, long a skeptic of the notion that drivers will go all-electric, is breaking from other automakers and proposing that federal EV tax credits be altered so its hybrid vehicles can also qualify.
The Japanese automaker's plan, outlined to POLITICO’s E&E News on Tuesday, emerged as President-elect Donald Trump is vowing to roll back government support of EVs and promising to revisit rules and regulations written by the Biden administration to support electric cars and fight climate change. A Toyota executive laid out a similar argument weekend in an op-ed in The Wall Street Journal on Sunday.
“We are not in lockstep with some of our competition,” said Zachary Reed, a Toyota spokesperson, a week after the main auto lobby said that it supports keeping a key EV tax credit in place in order to better compete with China.
At issue is the $7,500 tax credit for electric vehicle purchases that Congress wrote into the 2022 Inflation Reduction Act. Republicans are set to have a majority in both houses of Congress, and some GOP members have called for a thorough reevaluation of federal rules to stamp out preferences for EVs. READ MORE
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