President Donald Trump visited Detroit in March this year to make some announcements that on the surface you would think would be pleasing to American auto workers and would reduce the price of vehicles, but does and is it?
What were the policies?
There were two basic policy changes to Obama philosophy. They will essentially only affect the USA vehicle market but one of them has the potential to be global especially if policy in Australia followed suit.
The first probably wont affect us as it was about having more USA made content in the vehicles produced in America. Essentially it would make car manufacturers in USA look at where each indivdual part was made and guarantee to the Trump administration that most were made in their country.
That will be a major thorn in the side of the global strategy car manufacturers have adopted and most USA manufacturers agree that it would increase vehicle prices and make them less competitive to imports.
It would then be assumed that Trump would then increase tariffs on vehicles imported to the USA and as all economists know this would stifle vehicle development and send the market backwards.
The second policy is even more of a concern. It is a reduction in the CAFE program (Corporate Average Fuel Economy) or in lay terms what the fuel efficiency of your car is. The stricter policy was introduced by the Obama administration in accordance with it policies on climate change to lower vehicle emissions.
What is the effect of lowering the bar on CAFE?
USA car manufacturers complained earlier in the year that the high CAFE was going to make car manufacture more expensive and cost jobs because of the extra research and development required to achieve the targets put in by Obama (even if it was good for the environment).
True to belief of Trump that global warming and environment agreements were hocus pocus and we were all going to okay regardless of how much waste we pump into the environment, he promised to lower the bar.
Putting the environmental concerns aside, what are the likely effects of a rollback of fuel economy standards, and of Trump policies in general?
It appears that owning a car will be more expensive over the long haul. Here’s why.
It would seem, then, that repealing the rules would save car buyers money, right? Actually, no. While sticker prices for cars would likely decrease or level off if the fuel economy standards disappeared, studies show that the long-term cost of owning a car would increase.
As the annual AAA report shows, the biggest cost of owning a car is fuel. Lower standards means an increase in fuel usage or at least they stay the same while fuel prices increase. The flip side is that drivers can save significant money by owning the kinds of fuel-efficient vehicles being pushed for by the CAFE regulations.
So in a nut shell without going too technical, decrease the efficiency of a vehicle makes it cheaper to manufacture by $1-3,000 but if we increase fuel efficiency and add the saving to the cost we save $1-2,000 dollars per year in fuel usage costs. At that same time we pump more waste into the environment.
Will it happen in Australia?
We would hope not but you can see it having an affect if other manufacturing companies took the same stand to be competitive with the USA. It can't be good for motor vehicle development if the worlds largest economy and one of the biggest car builders starts going backward with their technology to save on cost.
We shall wait and see and meanwhile there will be some applause from the far right who seem not to believe in pollution but more in short term $ gain.