As part of sweeping efforts to reduce regulation and boost business, President Trump this week announced plans to relax fuel economy standards. The Corporate Average Fuel Economy (CAFE) standards, which were implemented decades ago but accelerated under President Obama, call for automakers to reach a fleetwide average 54.5 miles per gallon by 2025.
In typical deal-maker fashion, Trump went to Detroit to announce the easing of CAFE standards, while insisting that the area’s automakers in return create more manufacturing jobs. Automakers are, of course, reflexively adverse to regulation and welcomed the news. This is, after all, the same group that fought airbags from becoming standard equipment for years.
Even before the election, car companies contended that the 2025 fuel economy targets would be difficult to meet without an increase in electric and hybrid vehicle sales. Alternative-fuel vehicles sales traditionally have been tepid, and have met even stronger headwinds amidst lower gas prices.
The EPA under Obama argued that automakers could meet the standards with existing technologies and save consumers up to $92 billion at the gas pump while significantly reducing greenhouse-gas emissions. But the larger ramifications for Trump’s rolling back of regulations could be stifling the innovation that’s flowed from automakers’ constant quest for higher fuel economy.
And this not only includes alternative fuel vehicles such as EVs, hybrids, and hydrogen-powered cars, but the traditional internal combustion engine (ICE) as well.
Wringing Out the MPG
Ford famously created the latest generation of the F-150 pickup, the best-selling vehicle over the last 40 years, using aluminum in the body to help the truck shed pounds and save fuel. And automakers have introduced technologies such as auto engine start-stop and active grille shutters and increased use of turbocharging to wring even more miles per gallon out of conventional ICE power plants.
Christie Todd Whitman, the head of the head of the EPA under President George W. Bush, told Forbes in an interview this week that keeping stringent fuel economy standards in place will force automakers to come up with fuel-saving innovations. During her tenure, for example, the business-friendly Bush administration managed to get manufacturers of diesel engines to cooperate on strict fuel and emissions standards, she said.
“When we did the diesel rule, I was told time after time that I was killing an industry,” Whitman said. “But I got one engine manufacturer who said, ‘Yes, we can do it.’ The regulation is now in place, and diesel emissions have been reduced by over 95 percent.”
The manufacturer was diesel giant Cummins. Instead of fighting the EPA regulation, the company used the US standards to create new business opportunities by developing diesel engines that lowered fuel costs and also helped meet environmental regulations in other countries.
Adhering to the US emission standards not only helped Cummins became a technology leader, but also fast-tracked growth in countries like China and India, which began to implement similar emissions regulations. “As we got better and better at these products, we were able to take them around the world and grow our business,” Cummins CEO Tom Linebarger told Forbes.
The solution was working with regulators to achieve standards that are a win-win for business, consumers, and the environment, Linebarger said.
“You don’t want to put anybody out of business, but you have to keep the pressure up, or they’ll keep doing things the way they’ve always done for as long as they can,” Whitman added. “We can have a thriving economy and a clean environment. It’s proven.” Auto industry innovation and smart regulation are the proof.
