Several major automakers go it on their own and reach their own compromise with the state of California
Later this summer, the Trump Administration is expected to lay out precisely how it expects to overturn rules requiring car manufacturers to produce more fuel-efficient vehicles. But four major auto makers, and the state of California just said, in effect, don’t bother.
Those automakers: Ford, Volkswagen, Honda and BMW, agreed with California to increase average miles per gallon in the cars they produce almost to the level mandated by the Obama administration. In the new California agreement, those automakers would agree to around 51 mpg by 2026, instead of Obama’s 54.5 by 2025. That compares to Trump’s upcoming proposal, which he’s already made pretty clear would require automakers to do no better on mpg than they’re doing right now.
This new agreement is also a blow to the Trump Administration’s attempt to end California’s ability to establish and enforce separate automotive standards than the federal government’s. We always like to point out that this all started in the late 1960s with then California Governor Ronald Reagan, who set up the California Air Resources Board, which eventually gained waivers from the federal government to impose stricter tailpipe standards, which are still in place today. California’s become such a leader in vehicle emissions that a lot of other states now follow its regulations.
The four carmakers involved represent about 30% of all U.S. car sales. Although they are not all American companies, all of them have major factories in the U.S. BMW for instance, builds more cars in its South Carolina plant than it sells in this country, so it exports from here.
Why would car makers want to do this when Trump is offering them potentially much sweeter terms and making it clear he would put the full force of the federal government behind it? Because they have to. They can’t simply wait around for a long, brutal and viscous court battle to play out, not knowing meanwhile what kinds of cars they are or aren’t going to be able to build for the U.S. market. (It’s also possible the “deal” with California is not necessarily intended as an end in itself, but a message to Trump’s folks about what could happen if they insist on being obstinate and not allowing everybody to work together.)
Now Trump could pursue these court battles anyway, just out of spite and punishment for going behind his back. The more “adult” thing to do would be to applaud the automakers’ initiative (he certainly isn’t going to praise California), and take credit for forcing a less-restrictive deal, even if it is only a little less restrictive. But we don’t see him doing that for the simple fact he didn’t get the deal he wants. That tends to be more the impetus for a tantrum. And his administration has already hinted that’s the direction they’ll go, calling the California agreement “a publicity stunt”.
But automakers know in order to be able to compete globally, they’re going to have to invest in building more efficient cars anyway, regardless of whether or not Trump continues to allow gas guzzlers on U.S. roads.
And they also know once Trump’s out of office, they cannot expect the same level of protection he’s promising or delivering in the form of subsidies, tariffs, tax breaks, etc., from any future President, Democrat or Republican.