Ignore the Automakers’ Calls for Appeasement

Today President Trump will meet with the big U.S. automakers. The topic of discussion will be the administration’s decision to reconsider the excessive and unnecessary fuel efficiency standards imposed by the Obama administration. The American Energy Alliance has applauded that decision, and encourages the administration to see it through. The automakers themselves last year requested the exact action that the administration is undertaking. But now the automakers are planning to ask the administration to compromise with California on setting these mandates. While disappointing, this should not be surprising. U.S. automakers, so long held hostage to government mandates and subsidies, have come to identify with their captor.

Corporate Average Fuel Economy standards (CAFE), the official title of the U.S. fuel efficiency mandate, is one of the more outdated laws still on the books. CAFE was created back in the 1970s in response to the oil price shocks of that decade and a Malthusian fear about the world running out of oil. Whatever the initial logic of the program, recent years have shown it to be an anachronism. The U.S. is awash in oil, producing more than ever before in our history, and notwithstanding political turmoil in certain countries, there is no prospect of the world market running out of oil. American consumers similarly have shown their disdain for the CAFE program, overwhelmingly favoring trucks and SUVs as their vehicles of choice.

Given these factors, the Trump administration is absolutely right to reject the aggressive CAFE standards imposed by the prior administration. Those standards are so aggressive that they really amount to an electric vehicle production mandate, since the only way to comply is to build more electric vehicles. The automakers understandably opposed that burden, given that electric vehicles cost more to produce, generate little to no profit, and are not desired by consumers.

With relief on the horizon, at first glance it would seem odd that the automakers would now be going soft. Battered and abused by the regulatory behemoth, the automakers fear that the state of California ­­– which has a special waiver to impose more aggressive tailpipe emissions regulations, though no power over CAFE standards – will create a regulatory situation in which different rules apply in California than in other states. Thus the request to the Trump administration to compromise with California, the state that repeatedly has taken the auto industry hostage to push its aggressive, harmful regulatory agenda on the rest of the country.

This is not the auto industry’s only recent brush with appeasement of the regulatory leviathan. Just a few months ago, the CEO of GM, Mary Barra, asked Congress to expand the tax credit that subsidizes purchases of electric vehicles. The automakers have also supported state-level electric vehicle mandates, for example in Maryland, with other parties (taxpayers or electricity ratepayers) footing the bill.

Thus have the automakers, some perhaps additionally influenced by their recent time as literal wards of the state, come to identify with their captor, the government. Instead of subsisting on whatever subsidy scraps and regulatory dispensations benevolent government grants them, they should fight for their customers and for themselves.

The Trump administration should ignore the plea to soften their approach to the Obama CAFE mandate and take on the overreach of California. Americans will see the benefits in lower costs of cars and greater choice in the market. And the automakers will benefit too, even though they won’t say it out loud.