Biden takes Detroit for a ride

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GMC Hummer electric vehicles at General Motors Factory ZERO electric vehicle assembly plant in Detroit on November 17.


Photo:

Nic Antaya / Getty Images

Political theater can be more entertaining than what is shown on television. It’s hard not to laugh as you watch automakers get overtaken by the Biden administration after working so hard to promote its electric vehicle program.

In the latest comedy twist, the administration last week released new fuel economy standards that effectively mandate electric cars to account for 17% of auto sales in 2026, up from around 3% this year. It was the day after Senator Joe Manchin rejected President Biden’s Build Back Better plan, which includes a cornucopia of subsidies for electric vehicles.

Environmental Protection Agency administrator Michael Regan has proclaimed the “most ambitious” rules ever. He is right. They are more aggressive than Obama’s rules, which the Trump administration cut after automakers complained about being too tough. They are also stricter than the EPA standards proposed this summer.

Yet Mr Regan asserted that the agency’s de facto electric vehicle mandate is achievable because automakers are making “public commitments to build these vehicles in the future” and “the standards have been calibrated. to align and support these investments ”. Cue eyes-rolled in Detroit.

Traditional automakers approved stricter fuel economy rules in August on the condition of more federal largesse. “We support the administration’s goal of achieving a future for electric vehicles,” BMW, Ford, Honda, Volkswagen and Volvo said in a statement at the time. But “bold action by our federal government partners is crucial to boost consumer demand for electric vehicles.” The authorities seem to have their own idea of ​​who is leading this partnership.

Ford, GM and Stellantis (the former Fiat Chrysler) hailed the summer standard while noting that they will need a “full suite” of subsidies for electric vehicles. These include “incentives to purchase, a complete charging network of sufficient density to support the millions of vehicles these targets represent, investments in R&D and incentives to expand the manufacture of electric vehicles. and supply chains in the United States ”. What, no guaranteed annual profit either?

BMW, Ford, Honda, Volkswagen and Volvo look particularly like naive politicians after forming an alliance with California last year to comply with fuel economy standards stricter than Trump’s rules, hopefully it does. would protect them from an even more onerous future mandate. The EPA now says the “voluntary” deal with California demonstrates the feasibility of its latest standards, and the EPA cites summer approval quotes from automakers in support of its new, more onerous rules.

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The Biden rules are more aggressive than California’s, and they limit the additional credits that automakers can put aside for advanced technologies, natural gas vehicles and full-size hybrid pickups. Companies will also not be able to roll over as much credit as they have Trump years to comply with in the future.

Manufacturers of electric vehicles have lobbied for these reduced “flexibilities”. Tesla is making a fortune selling its excess regulatory credits to mainstream automakers struggling to comply with fuel economy rules. Last year, he pocketed $ 1.58 billion in credit sales, more than his net income of $ 862 million. The Biden Rules will help Tesla and EV startups make more money.

Traditional automakers will find it even harder to comply once they hit the 200,000 vehicles per business cap on the $ 7,500 consumer electric vehicle tax credit. It could be soon, as they produce electric vehicles at a discount to meet mandates. Startups Tesla and EV could even benefit from BBB’s failure, as traditional automakers need grants to sell cars in order to fulfill Biden mandates. If BBB goes down, they will have to buy more regulatory credits from electric vehicle manufacturers.

It’s understandable that auto executives and shareholders are upset by the double cross, but that’s what happens when companies go to bed with government as “partners”. Politicians don’t respect you in the morning.

Journal editorial report: This is not transitory. For most Americans, this is terrible. Images: Getty Images Composite: Mark Kelly

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Published in the print edition of December 30, 2021.

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