Au­tomak­ers un­likely to end quest to boost fuel econ­omy

Even if Trump eases stan­dards, most see value in ef­fi­ciency.

Austin American-Statesman - - BUSINESS -

Just be­cause Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion might ease up on U.S. fuel econ­omy re­quire­ments, don’t ex­pect gas guz­zlers like the gi­ant 13 mpg Hum­mer H1 to make a come­back.

Ex­ec­u­tives from au­tomak­ers and sup­pli­ers gath­ered at a con­fer­ence out­side of Detroit this week said looser fuel econ­omy stan­dards might al­low for sales of more trucks in ar­eas where they’re pop­u­lar. But oth­er­wise, the pur­suit of fuel-ef­fi­ciency tech­nolo­gies will pro­ceed un­abated.

Trump came to the Detroit area this week to an­nounce that his En­vi­ron­men­tal Pro­tec­tion Agency will re-ex­am­ine gas mileage re­quire­ments that

were af­firmed in the Obama ad­min­is­tra­tion’s last days. Those reg­u­la­tions re­quire the fleet of new cars and trucks to av­er­age 36 mpg in real-world driv­ing by 2025, about 10 mpg more than the cur­rent stan­dard.

Ex­ec­u­tives at the Fuel Econ­omy Detroit con­fer­ence said the bil­lions of dol­lars al­ready in­vested in more-ef­fi­cient ve­hi­cles makes re­vers­ing course im­prac­ti­cal. And while the U.S. might ease some rules, other coun­tries are tough­en­ing them, leav­ing the in­dus­try no choice but to keep re­search­ing ways to make gas en­gines more ef­fi­cient and de­velop cheaper and longer-range elec­tric and hy­dro­gen fuel cell ve­hi­cles.

“We’re all global com­pa­nies. We have to de­sign our ve­hi­cles to be fuel ef­fi­cient not only in the U.S., but in Europe and Asia,” said John Juriga, di­rec­tor of pow­er­train at the Hyundai-Kia tech­ni­cal cen­ter near Ann Ar­bor, Michi­gan.

Au­tomak­ers lob­bied Trump to get the govern­ment to re­open a “midterm re­view” of the stan­dards for 2022-2025. They say the EPA un­der Obama rushed out the re­view just seven days be­fore Trump took of­fice, and re­neged on prom­ises to get in­dus­try in­put. The agency also didn’t place enough weight on the pro­nounced con­sumer shift to SUVs and trucks, ac­cord­ing to the au­tomak­ers.

Given Trump’s prom­ises to auto CEOs about eas­ing reg­u­la­tions, it’s likely the re­quire­ments will be weak­ened when the new re­view is fin­ished by April of next year.

Here’s what that could mean for new ve­hi­cles:

What will change

Truck and SUV sales likely will keep ris­ing. Auto com­pa­nies don’t ex­pect a ma­jor cut in the 36 mpg re­quire­ment. But they’re hop­ing for stan­dards that are flex­i­ble enough for them to sell more trucks and SUVs with­out penal­ties. Those high­profit, big­ger ve­hi­cles made up over 60 per­cent of new ve­hi­cle sales last year, up from less than 50 per­cent five years ago.

Lower mileage re­quire­ments will let the in­dus­try sell more trucks and sport util­ity ve­hi­cles in ar­eas like the South­west, where they are pop­u­lar.

Prof­its from those high-mar­gin sales will help pay for low-mar­gin elec­tric and other ef­fi­cient cars sold on the West Coast, says Sam Abuel­samid, a se­nior an­a­lyst for the mar­ket re­search firm Nav­i­gant.

If the stan­dards re­main the same and gas prices stay low, the in­dus­try says it would lose money try­ing to sell more fuel-ef­fi­cient cars to peo­ple who don’t want them.

Like other au­tomak­ers, Hyundai and Kia have the tech­nol­ogy to meet the stan­dards, but the cost has to be weighed against con­sumer de­mand, Juriga said.

What won’t change

Au­tomak­ers and parts com­pa­nies will con­tinue to make more fuel-ef­fi­cient ve­hi­cles. Paul Nahra, di­rec­tor of the Ad­vanced En­gine Group for parts maker BorgWarner, says his com­pany sells to au­tomak­ers world­wide in­clud­ing re­gions with stricter gas mileage stan­dards. “We need to be push­ing the right tech­nol­ogy that’s go­ing to get broad ac­cep­tance,” he says. For in­stance, China, Europe and Ja­pan will all re­quire fleets to av­er­age 47 miles per gal­lon or higher by 2020.

Work con­tin­ues to down­size en­gines, shed weight and on new en­gine tech­nol­ogy that makes a gas en­gine per­form like a more ef­fi­cient diesel. “So far there’s no in­di­ca­tion there’s go­ing to be any back­track­ing on this stuff,” says Abuel­samid.

The fall­out

En­vi­ron­men­tal groups and the states of Cal­i­for­nia and New York took le­gal ac­tion after Trump’s an­nounce­ment and claimed that higher pol­lu­tion could harm chil­dren and se­nior cit­i­zens. “

Juriga said it’s pos­si­ble that au­tomak­ers would de­lay rolling out new fuel-ef­fi­cient ve­hi­cles in some mar­kets if de­mand is low.

Cal­i­for­nia and more than a dozen other states have the power to set stricter fuel econ­omy stan­dards than the fed­eral govern­ment and likely would if Trump rolls back fed­eral stan­dards. That al­most cer­tainly would lead to a court fight.

ALEX BRAN­DON / AS­SO­CI­ATED PRESS 2011

Au­tomak­ers that have in­vested in re­search to de­velop fuel-sav­ing ve­hi­cles, such as this elec­tric car, are likely to keep up the ef­fort to be able to sell in over­seas mar­kets.

GENE J. PUSKAR / AS­SO­CI­ATED PRESS 2015

Auto in­dus­try ex­ec­u­tives ex­pect some U.S. mar­kets to con­tinue fa­vor­ing larger gas­guz­zling ve­hi­cles. Prof­its from those high-mar­gin sales will help pay for low-mar­gin elec­tric and other ef­fi­cient cars sold on the West Coast, Europe and Asia, says Sam Abuel­samid, with the mar­ket re­search firm Nav­i­gant.

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