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Yesterday, as the so-called president of the United States was bloviating about blowing defenseless people out of the water with millions of dollars worth of rockets, he was surrounded in the Offal Office by senior executives from the three legacy US automakers. They were in attendance to celebrate the repeal of the Biden-era corporate average fuel economy standards, a move that will give them license to sell more large SUVs and trucks.
The administration bragged that lowering those fuel economy standards would save US consumers $109 billion over the next five years and reduce the cost of new cars and trucks by an average of $925. As Bloomberg pointed out, however, those savings are largely illusory, as owners will pay more for gasoline than they would have otherwise. It says the net benefit will be more like $24 billion — or $181 per US household spread over 5 years.
The average cost of new cars has risen from less than $40,000 in 2020 to over $50,000 today. The administration would have you believe all of that increase can be attributed to the higher cost of making more fuel efficient vehicles, which omits entirely the tidal wave of economic disruption that swept the world as a result of the Covid 19 pandemic. It also ignores the higher costs for aluminum and steel so vital to the auto industry because of the cockamamie tariffs imposed by this current cabal of MAGA militants.
Bring On The Gas Hogs!
The implication is clear. The Big Three are going to go big on gas hogs. Bill McKibben, predictably, was appalled by the auto execs smiling while the fearless leader blasted immigrants as “garbage.” He claimed they have now signed their own death warrants, as Chinese automakers drive the clean transportation revolution forward. Soon America will be like Australia — a dumping ground for highly polluting vehicles that can’t be sold in any other nations where common sense and effective political leadership prevail.
McKibben says the support for EVs contained in the Inflation Reduction Act was the last real chance for the US auto industry to transition to non-polluting vehicles because it offered a way for the industry to make the transition by underwriting the retooling needed to make it happen. “But instead of fighting for that, these executives have truckled to the president, and sold the future of their companies for a few more years of turning out Escalades,” he said.
Bloomberg notes that EPA data shows GM, Ford, and Stellantis all trail far behind other automakers in their average fuel economy performance, with Stellantis being by far the worst. Its average fuel economy was actually a trifle worse in 2923 compared to 2020 at less than 22 mpg. Ford also went backwards. Kia showed the largest gain, going from about 28 to nearly 32 mpg.
Gas Guzzlers & Profits
The importance of gas guzzlers is illustrated by Ford. Bloomberg says more than half its US models average cost more than $50,000 and those vehicles account for 80% of its US revenue pool. Its F-Series pickup trucks alone account for almost half of its revenue and a large share of its profits. Everybody knows Ford, GM, and Stellantis are gouging their truck and SUV customers, but no one seems to care. Instead they are running around like their hair was on fire screaming about how expensive EVs are.
On this site, our readers see ads for all sorts of things that have nothing to do with clean tech. We have no control over those ads, which are supplied by the gods at Google. One in particular that has been popping up a lot lately advertises new Mustangs that cost between $52,000 and $60,000. I am probably way behind the times, but that seems like a lot of money for a car that only has room for small children in the back seat.
“In the real world, relaxing mileage standards, along with the earlier removal of penalties for missing them, will spur Detroit to sell more of the higher margin, lower fuel economy trucks and SUVs at the core of its business model, as opposed to shifting production toward smaller, cheaper models,” Bloomberg said.
“The question hanging over this, however, concerns the longer-term cost. The retreat to US trucks at higher prices has shored up earnings for the Detroit Three, but it limits growth and erodes international relevance as Chinese automakers redefine competitiveness, and electrification continues to make inroads elsewhere.
“It is possible that the US automakers take the current opportunity to recycle profits from selling more trucks into developing EVs, including the cheaper one being touted by Ford, or maybe even some cheaper gasoline models. Equally, operating inside a bubble formed from protectionist trade policy and anti-green ideology risks leaving Detroit increasingly vulnerable to disruption as the industry changes around it and when political fortunes shift.”
Abandon Hope
That last point is important. The Big Three automakers are essentially abandoning any hope of being competitive on the world stage and are perfectly willing to live within their tariff-walled garden while the rest of the industry passes them by. That may be tactically successful but a strategic disaster. Sean Duffy, the former Faux Comedy Channel host who is now the secretary of transportation, gloated that, “This rule will actually allow you to bring back the 1970s station wagon. Maybe a little wood paneling on the side.” Oh, Lord. How I wish I still owned my 1971 Ford LTD Country Squire!
So, where does the EV revolution go from here? This week, Inside Climate News put that question to Peter Slowik, who covers the US passenger car segment for the International Council on Clean Transportation. He told ICN, “We think it will probably take a few quarters for the market to stabilize, but the long term outlook, the fundamentals, the decline in costs and the increasing cost reductions that we’re seeing — all those fundamentals remain solid.”
He envisions a time when a customer can buy an EV for the same price or lower price than a comparable gasoline-powered vehicle. ICCT thinks that will happen across most vehicle segments by 2028 or 2029.
Slowik said the lower cost of owning and operating an EV will become better appreciated by more people and motivate them to gravitate toward electric cars. Maybe. My experience in the car business suggests people are 98% influenced by their monthly payment and all those other factors are largely irrelevant.
The Transition Is Inevitable
“We think this transition is inevitable, and the automakers that can [best navigate] this transition are the ones that are likely to win the race,” Slowik said. “They stand to win big, both at home, in terms of their domestic manufacturing volumes, and their sales shares relative to other automakers, but then also abroad.”
The push and pull of adding or subtracting subsidies will ultimately matter less than larger factors, such as the long term decline in battery costs and the increase in battery efficiency, but in the meantime, EV sales in the US are in for some tough sledding, he said.
The one thing that seems clear from the events of this week is that US automakers blow with the political winds and have no corporate-wide allegiance to anything but the creation of profits. They care not one whit about how the pollution from the vehicles they manufacture affects the environment and no long term plans to do anything about it.
The US may see itself as a bulwark against the green new scam, but like a rock in the middle of a stream, the river of commerce will simply flow around the impediment, making it irrelevant. Then these greedheads will come whining to the American taxpayers, begging for yet another bailout.
They have made their beds and now they have to lie in them. Perhaps we should consider revoking their social license to do business? They richly deserve whatever existential crisis awaits them in the road ahead.
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