1. Shifting gears: Lower fuel economy standards mean short-term gains for US carmakers

Shifting gears: Lower fuel economy standards mean short-term gains for US carmakers

Lower fuel economy standards mean short-term gains for US carmakers, but also spell long-term erosion of competitiveness.

By: | New Delhi | Published: February 13, 2018 4:47 AM
fuel, fuel economy, donald trump, us, trump administration, barack obama By lowering the standards, the US will have only 10% of its new cars and light trucks sold in 2030 to have hybrid engines or plug-in electric charging.

The Trump administration is reportedly considering a range of options to lower fuel economy standards set in the Bush and Obama era. This, it reasons, will give the automobile industry a boost. The US National Highway Traffic Safety Administration is mulling over bringing down the average fuel economy standard to 35.7 miles per gallon by 2026, from the 46.6 miles set under the Obama administration, as per a Bloomberg report. By lowering the standards, the US will have only 10% of its new cars and light trucks sold in 2030 to have hybrid engines or plug-in electric charging, against 61% such vehicles under the Obama standard. While US automakers may find the proposed standards easier to comply with, the fact is that many states are unwilling to lower green standards so drastically. In the end, a face-off between the states, like California that has made it clear that it favours stringent fuel economy standards, and the federal regulator could cost the automakers dearly if the matter remains locked in litigation. The US carmakers must remember that consistent standards nationwide are far more beneficial for them than any relaxation of standards.

What they also must consider is that the lowering of standards may be a short-run gain, but it will make them uncompetitive in the long run. Higher fuel economy standards and more electric cars are the need of the hour to help mitigate climate change effects of vehicular pollution. Automakers had, in 2011, agreed to strict fuel economy standards that would have helped the average fleetwide economy to reach 50 miles per gallon. But automakers have rallied with the Trump administration to lower the standards. With many European and Asian auto majors already betting big on electric and hybrid—this list includes Renault Nissan, Volkswagen and Toyota—there is a chance, with growing awareness about the effects of hydrocarbon fuel-burning on the environment, American car companies will lose by going back a decade. Even so, the lowering of standards will also mean that the billions of dollar committed by a Ford and a General Motors, to electric and hybrid vehicles, may not materialise, which means these companies won’t even be able to capture export markets like China and India that are looking to push EV adoption.

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