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      06-07-2019, 02:39 AM   #1
EstorilM240
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Trump plans to loosen CAFE MPG standards - carmakers say that will reduce profits?

Posting in politics since although it is car-related news, it is rather political in nature.

https://www.nytimes.com/2019/06/06/c...ck-letter.html

Quote:
WASHINGTON — The world’s largest automakers warned President Trump on Thursday that one of his most sweeping deregulatory efforts — his plan to weaken tailpipe pollution standards — threatens to cut their profits and produce “untenable” instability in a crucial manufacturing sector.
...
For automakers, a bifurcated market is their nightmare scenario. In the letter to Mr. Trump, they warned of “an extended period of litigation and instability” should his plans be implemented.
I know there are arguments for and against higher CAFE MPG standards in general from an environmental and economic perspective, but the opposition from carmakers is somewhat confusing.

Doesn't compute for me, especially reduced profits. If the argument is that having two markets (one 54.5MPG, one 37MPG) will add confusion and reduce profits, then why not just continue to voluntarily follow the old 54.5MPG nationwide regulations? If keeping track is too complicated for their spreadsheets or the lawsuits will mean uncertain results, they can avoid risk and voluntarily hit only high MPG.

The problem of people crossing state lines to buy lower MPG cars is a challenge that you can either deal with if it's worth it, or you can try to hit 54.5MPG everywhere. There are also ways to tax or otherwise surcharge depending on where the car will be registered, to produce the desired effects - seems like basic economics. Automakers already sell across markets with different standards, and there have always been different PZEV, ULEV, etc. versions of cars - sometimes I remember they would only sell the lowest-emitting one in California, for instance.

Quote:
While two of the nation’s Big Three companies signed the letter, the third, Fiat Chrysler, did not. Other automakers who signed the letter include BMW, Honda, Mazda, Nissan, Subaru and Volkswagen.
Is the argument basically a roundabout way of expressing regulatory capture? If there is more regulation, there will actually be higher profits from automakers due to less pure competition. It could be a prisoner's dilemma type game, where if this 37MPG directive goes through, most automakers keep shooting for 54.5MPG because of 2-market uncertainty, while Fiat Chrysler targets 37MPG nationwide, causing drama.

Or that they are so bad at innovation that they basically need someone to tell them to plan for potential $200/barrel oil prices and not only build gigantic gas-only SUVs?

Or that without strict regulation, some automakers will be making inefficient engines with 3 speed transmissions, while their sales and battery technology is overtaken by upstart companies from other markets?

My conclusion is there are three paths for automakers: 1) status quo (higher CAFE standards 2) Trump proposed lower CAFE standards, but possibly 2 markets 3) compromise with middle CAFE standards for whole country. They prefer 3 over 1, and so are pushing for that. However, it's unclear why 2 is worse than 1 for automakers (as opposed to environmental). Maybe there are other reasons, or the back-and-forth switching costs once Trump leaves office and the standard goes up again will be the ultimate cost.

Last edited by EstorilM240; 06-07-2019 at 03:07 AM..
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      06-07-2019, 03:03 AM   #2
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It doesn’t even matter. It might save some US only models from the axe for a couple years if anything. The industry is moving to EVs as they should. They will not reverse course for the US only, which is a mature market having already reached “peak car”. Imagine if a car company bet on relaxed requirements and then Trump gets voted out. Only the far right wants to do this. Every car is gonna be a plug-in hybrid or full EV crossover in 10 years no matter what Trump does.
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      06-07-2019, 05:49 AM   #3
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Originally Posted by chris719 View Post
It doesn’t even matter. It might save some US only models from the axe for a couple years if anything. The industry is moving to EVs as they should. They will not reverse course for the US only, which is a mature market having already reached “peak car”. Imagine if a car company bet on relaxed requirements and then Trump gets voted out. Only the far right wants to do this. Every car is gonna be a plug-in hybrid or full EV crossover in 10 years no matter what Trump does.
This.
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      06-07-2019, 07:43 AM   #4
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And also even if ev fails I bet Europe keeps going with high mpg request so it won't matter what rules here will say. I think this is just trump trying to be politician and kissing butt of those stupid guys who purposely make their pick up trucks blow out black smoke.
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      06-07-2019, 07:46 AM   #5
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Originally Posted by chris719 View Post
Every car is gonna be a plug-in hybrid or full EV crossover in 10 years no matter what Trump does.
Overstatement.
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      06-07-2019, 08:34 AM   #6
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Originally Posted by chris719 View Post
It doesn’t even matter. It might save some US only models from the axe for a couple years if anything. The industry is moving to EVs as they should. They will not reverse course for the US only, which is a mature market having already reached “peak car”. Imagine if a car company bet on relaxed requirements and then Trump gets voted out. Only the far right wants to do this. Every car is gonna be a plug-in hybrid or full EV crossover in 10 years no matter what Trump does.
I'm confused. Your post reads as though you despise anyone who is against heavier regulations for IC vehicles and that only EV's are worth considering, yet your signature notes you drive a BMW M car.




I am going to call you on the last sentence as well. There is a whopping ZERO percent chance of that happening. Every car? What about Africa? There are approximately 10 million cars in Africa and there is a total of zero infrastructure to support EV vehicles there. The chance of that entire continent converting to EV vehicles in a decade? Zero.

Heck - even in the USA, there are areas where this is impossible. In my state alone - do you know how far I have to travel to find a charging station? 142 miles. And I live in the southeast. How far does someone have to travel in Arizona or Montana if they live in the rural areas?

To say that EV's or PIH's will 100% replace IC vehicles is ridiculous, let alone do it in a decade. Heck, the IC vehicle replaced the horse over a century ago, and you know what? I still see a lot of horses. The jet engine replaced the propeller 60 years a go. I still see a lot of prop planes. Flew in one commercially just the other day. And so on and so forth.
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      06-07-2019, 08:37 AM   #7
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Quote:
Originally Posted by Run Silent View Post
I'm confused. Your post reads as though you despise anyone who is against heavier regulations for IC vehicles and that only EV's are worth considering, yet your signature notes you drive a BMW M car.




I am going to call you on the last sentence as well. There is a whopping ZERO percent chance of that happening. Every car? What about Africa? There are approximately 10 million cars in Africa and there is a total of zero infrastructure to support EV vehicles there. The chance of that entire continent converting to EV vehicles in a decade? Zero.

Heck - even in the USA, there are areas where this is impossible. In my state alone - do you know how far I have to travel to find a charging station? 142 miles. And I live in the southeast. How far does someone have to travel in Arizona or Montana if they live in the rural areas?

To say that EV's or PIH's will 100% replace IC vehicles is ridiculous, let alone do it in a decade. Heck, the IC vehicle replaced the horse over a century ago, and you know what? I still see a lot of horses. The jet engine replaced the propeller 60 years a go. I still see a lot of prop planes. Flew in one commercially just the other day. And so on and so forth.
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      06-07-2019, 08:41 AM   #8
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Quote:
Originally Posted by glennQNYC View Post
Overstatement.
Agreed. I'm not convinced that pure EV will become the majority even in 20 years, if ever. Sure, petroleum is a very finite resource, but so are many of the metal components found in LI batteries. And just like petroleum, mining those metals has a huge environmental impact with respect to air, water, and ecosystems, especially strip mining which is the most common. Also, there is FAR more oil reserve than we originally thought and we're continuing to find more and more.

I envision the most likely scenario to be petro-powered cars with hybrid systems, perhaps not even as significant as something found in a Prius as those run fairly large battery packs too. More and more cars will go to smaller forced induced motors (likely turbo plus another FI unit), 8+ speed automatics, multi-clutch units and hybrid units in place of power/efficiency robbing torque converters (see what Benz is doing), electric water pumps, valve train wizardy (i.e., similar to what BMW is doing with the VANOs system), usage of lighter materials like CF and aluminum, etc. It will eventually get to a point that full size trucks and huge SUVs for personnel use will not be a feasible choice due to CAFE. My guess is those will be taxed heavily with something like a gas guzzler type tax, though that type of thing is way off in the future.
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      06-07-2019, 09:54 AM   #9
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Maybe the timetable is aggressive but I did mention hybrids. Anyway, the point was that Trump can do anything he wants and it doesn’t matter, especially if he doesn’t win in 2020.
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      06-07-2019, 10:29 AM   #10
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Originally Posted by chris719 View Post
Maybe the timetable is aggressive but I did mention hybrids. Anyway, the point was that Trump can do anything he wants and it doesn’t matter, especially if he doesn’t win in 2020.
You said 'plug in hybrid', not hybrid. There is a difference. PIH's still require substantial infrastructure, of which many countries don't have and of which certain areas in the USA don't have either.

I/C's may certainly lose favor as the majority choice, but they aren't going away, nor should they. Electric cars are great when done correctly, but that doesn't mean that IC cars are not. It isn't a binary decision.
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      06-07-2019, 01:15 PM   #11
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Quote:
Originally Posted by Run Silent View Post
You said 'plug in hybrid', not hybrid. There is a difference. PIH's still require substantial infrastructure, of which many countries don't have and of which certain areas in the USA don't have either.

I/C's may certainly lose favor as the majority choice, but they aren't going away, nor should they. Electric cars are great when done correctly, but that doesn't mean that IC cars are not. It isn't a binary decision.
Certain areas of the US don't have 120VAC? ICE-only cars with high consumption will get legislated out of existence for passenger cars, it's just a question of when.
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      06-07-2019, 01:17 PM   #12
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Originally Posted by chris719 View Post
ICE-only cars with high consumption will get legislated out of existence for passenger cars, it's just a question of when.
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      06-07-2019, 01:19 PM   #13
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Quote:
Originally Posted by chris719 View Post
Maybe the timetable is aggressive but I did mention hybrids. Anyway, the point was that Trump can do anything he wants and it doesn't matter, especially if he doesn't win in 2020.
Do you really believe NO American President has any impact on CAFE standards; or is this just an anti-Trump thing we have going on here?

Do you think an American President would have no impact in INCREASING standards too; or does the Executive's powers only allow for more-burdensome regulations?

Genuine questions.
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      06-07-2019, 01:25 PM   #14
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Quote:
Originally Posted by glennQNYC View Post
Do you really believe NO American President has any impact on CAFE standards; or is this just an anti-Trump thing we have going on here?

Do you think an American President would have no impact in INCREASING standards too; or does the Executive's powers only allow for more-burdensome regulations?

Genuine questions.
No president if we are talking relaxing standards, this has nothing to do with Trump. The rest of the world is basically harmonized in their desire and the industry will follow along. Only if the US were to be more restrictive than the EU would it matter.
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      06-07-2019, 01:28 PM   #15
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Believe what you want. Most good (big) engines were practically legislated out of existence in Europe except for niche models / exotic cars.
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      06-07-2019, 01:29 PM   #16
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      06-07-2019, 01:34 PM   #17
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Originally Posted by chris719 View Post
No president if we are talking relaxing standards, this has nothing to do with Trump. The rest of the world is basically harmonized in their desire and the industry will follow along. Only if the US were to be more restrictive than the EU would it matter.
Why is that?

More cars were sold in the United States last year than the entire EU. Heck, in China, almost twice as many cars were sold last year compared to the entire EU combined.

2018 Global sales

1. China: 28,754,875
2. USA: 18,175,893
3. E.U.: 15,624,486

Largest single country in the EU for sales: German at 3,436,112.
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      06-07-2019, 01:47 PM   #18
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Quote:
Originally Posted by Run Silent View Post
Quote:
Originally Posted by chris719 View Post
No president if we are talking relaxing standards, this has nothing to do with Trump. The rest of the world is basically harmonized in their desire and the industry will follow along. Only if the US were to be more restrictive than the EU would it matter.
Why is that?

More cars were sold in the United States last year than the entire EU. Heck, in China, almost twice as many cars were sold last year compared to the entire EU combined.

2018 Global sales

1. China: 28,754,875
2. USA: 18,175,893
3. E.U.: 15,624,486

Largest single country in the EU for sales: German at 3,436,112.
You beat me to it. I think people forget the economic powerhouse the US is.
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      06-07-2019, 01:53 PM   #19
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Quote:
Originally Posted by Run Silent View Post
Why is that?

More cars were sold in the United States last year than the entire EU. Heck, in China, almost twice as many cars were sold last year compared to the entire EU combined.

2018 Global sales

1. China: 28,754,875
2. USA: 18,175,893
3. E.U.: 15,624,486

Largest single country in the EU for sales: German at 3,436,112.
Because engine development is very expensive and if you can't amortize it over the entire world in sales you are not doing things optimally. You don't think Porsche sells a 4 cylinder in the US for fun, right? The NA H6 would pass all relevant US standards, but not EU.

It's almost like none of you have developed products for international sales before or can see the increasing level of harmonization of cars over the past 30 years. Anyway, I don't have any additional time to waste on this argument, look back in 10 years and we'll see.
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      06-07-2019, 02:08 PM   #20
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You beat me to it. I think people forget the economic powerhouse the US is.
This. Never underestimate the US. It is the only market that has consistently made me money since '87. It has been and may continue to be resilient as it is where capital is treated best. How long it continues is up to the populace. If some of the far left mandates are ever enacted that outlook will change.
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      06-07-2019, 02:20 PM   #21
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Maybe the timetable is aggressive but I did mention hybrids. Anyway, the point was that Trump can do anything he wants and it doesn’t matter, especially if he doesn’t win in 2020.
I'm an environmental consultant (20+ years in) and work with clients in all sorts of industries. If it helps you sleep, I can tell you that most of the industries/my clients could give a rat's ass about what Trump is doing by trying to dismantle US environmental regulation because they've been planning for years to meet the current and impending regulations, especially on the air and water side. The control equipment has been designed, bought, slated for purchase, etc. The business plans have been designed to account for the regulations and they will push forward even if they don't have to because they know that once he's gone, they will likely be reenacted or something similar.

Lastly, most companies now take environmental stewardship VERY seriously has their clients demand environmental stewardship and responsibility. There is real money to be made to be an environmentally conscious company. Also, regulations in the EU sometimes are more stringent and the company's adopt those regs internally as a best management practice.

So, overall, most business is paying very little attention to the Trump administration on the environmental side. The tax side? Yeah, it's a big deal, but only in the sense that the higher ups are making more money and not really passing it out to their employees. At least those are the stories I get from personnel at the facilities level that I speak with during my audits.
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      06-07-2019, 02:21 PM   #22
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Quote:
Originally Posted by chris719 View Post
Because engine development is very expensive and if you can't amortize it over the entire world in sales you are not doing things optimally. You don't think Porsche sells a 4 cylinder in the US for fun, right? The NA H6 would pass all relevant US standards, but not EU.

It's almost like none of you have developed products for international sales before or can see the increasing level of harmonization of cars over the past 30 years. Anyway, I don't have any additional time to waste on this argument, look back in 10 years and we'll see.
You never know who you are talking with on the internet, do you?

In addition, you mention that OEM's won't amortize costs over multiple legislative requirements when it comes to engines - yet that is exactly what is being done in the USA with respect to standard Federal Regulations and CARB.

But again.....what do I know? I'm sure you are right - there won't be a single I/C car on earth being produced in ten years. Yeah, let's go with that. Certainly China, being the largest market on earth, will go completely green in a decade, right? Because we all know that there is no pollution in China and the are the epitome of clean energy and honest environmental programs.

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