How Trump Could Rev Up — or Drive Down — the Cost of Your Next Car
WHY YOU SHOULD CARE
Because both the sticker price of that brand-new car and our environment are at stake.
By Nick Fouriezos
When the Environmental Protection Agency released its midterm evaluation of emission standard goals in November — eight months early — it was like a college student turning a paper in way before the deadline. Basically, unprecedented. The regulatory review, which becomes a de facto fuel economy mandate for 2022–2025 passenger vehicles, was instantly protested by car manufacturers. And, originally, the proposed findings weren’t going to be released until next year and approved by April 1, 2018, giving auto industry folks a chance to lobby for fairness before a change might cost them millions.
What changed? Well, Donald Trump became president-elect — and the early release makes it harder (though not impossible) for him to reverse those environmental goals. It’s just one example of how Trump’s presence has already sent tremors through the auto industry.
The real estate magnate has said he would renegotiate or renege on trade agreements, while potentially adding tariffs to foreign vehicles and parts that get imported — either of which could add hundreds or thousands of dollars to the sticker price of most cars, some experts warn. After breaking tradition by accepting a call from the Taiwanese president (a move the Trump team suggested was intentional and Chinese officials criticized), some industry leaders fret that a chilled relationship with China could lead to a trade war. The auto industry is intensely globalized, with even American brand “factories” actually serving as glorified conveyor belts of foreign parts being placed together. Fewer than 10 car models were made with at least 75 percent domestic product as of last year, according to the 2015 American-Made Index by Cars.com. Also, there’s a supply-and-demand issue with precious metals sourced from outside the U.S. and used for the parts in many cars, says West Virginia University mechanical engineer Gregory Thompson.
It’s perhaps the very emblem of American exceptionalism — and yet, even it gets almost a third of its parts from outside the good old U.S. of A.
While Trump ran a campaign of patriotic nativism, American car manufacturers may benefit more from open markets. After the North American Free Trade Agreement was enacted in 1994, auto part plants stampeded to Mexico, where many remain today. A renegotiation — or a new border wall — could slow or cut the flow of parts. Consider the 2015 Ford F-Series. It’s the best-selling truck in the nation and perhaps the very emblem of American exceptionalism — and yet, even it gets almost a third of its parts from outside the good old U.S. of A.
But Trump has also pledged to take on cumbersome regulations that have raised prices in the past. If he lessens some of that burden, automakers could conceivably start working toward their alternative energy goals more sustainably (and economically), rather than rushing to meet standards from the EPA or others where one company cuts corners then others follow suit. And emission standards will almost certainly get another look now that Trump has announced plans to nominate Oklahoma attorney general Scott Pruitt, a known climate change skeptic, to head the EPA. “There may be a deal to be cut,” says Alex Rosaen, director of public policy at Anderson Economic Group. Trump could work with Congress to loosen or even scrap the Corporate Average Fuel Economy standards — unpopular among conservatives — in exchange for a carbon tax.
Some experts, including Daniel Carder, director of the Center for Alternative Fuels, Engines and Emissions, which helped expose the Volkswagen diesel scandal last year, warn that without stringent regulations, car manufacturers could be less motivated to reach antipollution goals. And Bruce Belzowski, managing director of the University of Michigan’s Automotive Futures department of the Transportation Research Institute, says it is too early to assume which way Trump will go and how he might change things.
The ramifications of those deals are seen today, and Trump will have a part to play in this industry’s future.
For decades now, the federal government kept a close hand in the dealings of the industry, which employs almost a million Americans and traditionally accounts for 3 to 3.5 percent of U.S. gross domestic product. After the Great Depression hit and automobile sales fell by 75 percent from 1929 to 1932, recovery was helped by $10 billion in World War II–related government orders by February 1942. Jimmy Carter saved Chrysler with $1.5 billion in 1979 — and the modern auto industry might not be standing today if it weren’t for President Barack Obama’s $80 billion bailout that allowed Chrysler and General Motors to meet cash shortages in 2009.
The ramifications of those deals are seen today, and Trump will have a part to play in this industry’s future. Automakers recovered to sell a record 17.5 million cars and trucks in 2015, yet fear that upcoming demand could be depressed and still overly focused on gas guzzlers rather than emissions-reducing alternatives. Two days after Trump’s election, the Alliance of Automobile Manufacturers — which includes Toyota, General Motors, Volkswagen Group of America and others — called the 2022–2025 rules “a substantial challenge,” asked for a review of Obama-era regulatory actions and proposed a presidential advisory committee to guide auto policy.
Ford Motor Company, specifically, became a frequent Trump campaign-trail whipping boy due to its plans to move a Kentucky plant to Mexico, although some say the situation wasn’t quite so clear-cut. Still, the automaker prostrated itself publicly: “We agree with Mr. Trump that it is really important to unite the country, and we look forward to working together to support economic growth and jobs,” Ford spokeswoman Christin Baker previously said. While it may seem like bullying, it’s also a boon for the industry that it’s receiving such special focus from the incoming president — so long as they can bend his ear down the line.