Commentary: Big Tent Ideas

STEVE MILLOY: American Car Industry Needs Competition

Engine Assembly -- General Motors Assembly Plant Tour

Kudos to President Donald Trump for announcing a rollback of the Biden administration’s fuel economy standards. But in addition to selling Trump watches and meme coins, he may just have to start Trump Motors to teach the car industry how to make cars great again (MCGA).

The Biden EPA-issued Corporate Average Fuel Economy (CAFE) standards were not fuel economy standards so much as they were a de facto mandate for electric vehicles (EVs). Here’s a rough description of how the CAFE standards worked.

CAFE standards are not a gas mileage requirement that every car sold has to meet. They are the mileage standard that all cars sold by a manufacturer (aka the “fleet”) have to meet when all sales are averaged out. So even with the Biden standards, a car maker could still sell as many “gas guzzling” SUVs as it wanted, but it would then have to sell many more EVs so that the fleet average would attain the government-determined CAFE standard.

That might not be such a problem if all cars were equally profitable. But they’re not. SUVs are far more profitable than small, fuel efficient cars and electric vehicles. Keeping in mind that the car market is only so large, if a carmaker sells more SUVs, it will also need to sell more small cars and EVs to even up the CAFE scorecard. An alternative for car makers is to buy credits from each other or EV makers like Tesla to atone for not meeting the CAFE standards based on sales alone.

That is no way to run an industry. Trump and the Republican-controlled Congress understand this and have taken action. Congress revoked California’s EV mandate earlier this year. The One Big Beautiful Bill Act ended EV subsidies and also ended the penalties for carmakers who didn’t meet CAFE standards. This week’s proposal to roll back the Biden EPA’s impossible-to-meet CAFE standards was the next logical step.

It’s great, but it’s not enough, and President Trump cannot think that he is done.

The biggest problem is the car industry itself. As a regulatory consultant in the 1990s, I well remember the industry combatting over-regulation, especially from the EPA. With the powerful and forceful Michigan Congressman John Dingell, called the “Congressman from General Motors,” no regulator dared displease him.

But over the years, Dingell mellowed, and the car industry realized that it’s easier, more politically correct and still potentially profitable to just roll over and do what the government demands and pass on costs to consumers. That’s one key reason cars are so expensive these days.

This strategy has backfired on everyone, including the industry. Before the 1970s energy crisis, people bought a new car on average every five years. Now the average age of cars on the road is almost 13 years. Expensive new cars have driven people to used cars, which have also become less affordable.

Worsening this problem was the 2008-2009 financial crisis, during which General Motors took tens of billions in Troubled Asset Relief Program (TARP) bailout money. By doing so, GM earned the humiliating sobriquet, “Government Motors.”

Although Ford accepted no TARP money, it had a different type of problem, a management team that foolishly committed to believing in the climate hoax while driving a major car company. This eventually manifested itself as a financially disastrous embrace of EVs during the Biden era. GM and Chrysler did the same, all suffering billions and billions in EV losses.

President Trump is now trying to help the car industry recover from these disasters. And the car industry is at least feigning enthusiasm. But rest assured, if there is a Democrat in the Oval Office in 2029, the fickle and feckless car industry will be right back there trying to curry favor and agreeing to high CAFE standards, EV mandates and whatever else the powers-that-be demand.

To MCGA, Trump is going to have to make sure that his rule changes at EPA and elsewhere get finalized long before the 2028 election, which Republicans must win. The Republican Congress should get rid of the law that established the CAFE standards and penalties. The law is toothless now, but it should be made impossible to resurrect.

The U.S. car industry could also use some good old-fashioned U.S. (vs. foreign) competition. We need new American car companies that make great-looking and performing cars that  Americans want to drive. Existing U.S. companies have lost their way.

Trump Motors, anyone?

Steve Milloy is a biostatistician and lawyer. He posts on X at @JunkScience.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

(Featured Image Media Credit: Flickr via Joe Ross)