Trump fuel economy proposal would affect area dealers’ vehicle mix as states threaten to sue over it

The Trump administration’s proposed rollback of fuel economy standards to freeze them at 2020 levels is an important issue for Washington-area dealers, as the final standards will affect the vehicle mix they have to sell. Although the final rule will not be issued for several months, 19 states – including Maryland and Virginia – and D.C. have said if the final rule is the same as the proposed one, they will sue the Trump administration. Virginia signed on to the statement even though it does not follow California emissions standards, as Maryland and D.C. do.
If the final rule is the same as the proposed one, dealers will not have to worry about selling a certain percentage of zero-emission vehicles (ZEVs), as they do under the Obama-era rules now in place. Under those rules, agreed to in 2012 by automakers, California, and the Obama administration, the automaker’s obligation ends when it delivers a vehicle to a dealer. It’s then up to the dealer to sell it.

That’s a potential problem for dealers. Automakers can meet their obligation by sending a certain number of ZEVs to dealers. But retail sales of ZEVs have been modest so far, and dealers may have a hard time selling the ones they are sent.

NADA plans to comment on the proposed rule, focusing on changing consumer preferences and cost. When the original rules were written in 2012, no one foresaw the extent to which SUVs and light trucks would come to dominate the market. As for cost, the Trump administration estimates that the Obama-era rules would add an average $2,340 to the price of a new vehicle, though Obama officials argued that their rule would save money for consumers. NADA is concerned that the cost increase could put a new vehicle out of reach for many.

Maximizing vehicle turnover – helpful not just for sales, but because newer vehicles are cleaner and provide greater health benefits – depends on affordability and consumers’ willingness to buy. Creating the most beneficial program means looking at both what is technologically feasible and economically practical.

A joint statement from the two major automaker groups, the Alliance of Automobile Manufactures and the Association Global Automakers, urged California and the federal government to reach a compromise. But Trump administration officials have already met with California officials over the past several months, with no signs of progress. The Trump administration has shown it is determined to roll back Obama-era standards, and California is determined to retain the tough standards it has in place.

The rule is not final. The public has 60 days to comment on it, and public hearings will be held in Washington, D.C., Detroit, and Los Angeles. Dates for the hearings have not been set as yet.

Download Bulletin PDF