Biden Hits Reset On the Auto Industry

Two summers ago, the Biden Administration announced a somewhat daunting goal for America’s car industry at the time: to make sure that 50% of all new vehicles sold in 2030 would be zero-emission vehicles.

Evidently, that wasn’t enough of a stunner. With the Environmental Protection Agency’s announcement today of vastly more stringent proposed new emissions standards — the strictest ones America has ever seen — the adoption of new all-electric vehicles specifically could be as high as 67% by 2032.

To be fair, a lot has changed in less than two years. Countless new EV models have rolled out since and many more are coming soon. America’s charging network is rapidly expanding, thanks to federal and state investments as well as billions of dollars in grants for private companies. And last year’s Inflation Reduction Act mapped out a robust domestic battery manufacturing supply chain, as well as a modernized tax credit scheme to incentive EV adoption.

But besides seeing more EVs and chargers around, it may not be readily apparent to most people how quickly things are changing. Make no mistake: between those actions, what the EPA is proposing today, and broader global industry trends, the groundwork is being laid right now to transform the car industry into a mostly battery-electric one. Today’s EPA announcement could be seen as the “It’s happening” moment for the wide-scale shift away from gasoline vehicles.

“I think it’s one of the most pivotal climate regulations this administration has rolled out,” said Leilani Gonzalez, the policy director for the nonprofit Zero Emission Transportation Association.

The EPA’s announcement isn’t all that is happening. More changes are expected soon to American fuel economy standards as well that should drive automakers even faster toward an electrified future.

Moreover, some experts say today’s rules could even spur the growth of hybrid cars, specifically plug-in hybrids since the EPA will require automakers to lower emissions but it doesn’t stipulate which powertrain must be used.

Broader industry trends, tough regulations in Europe and China, and the global nature of the car business meant things were likely headed in this direction anyway. But in America, they just feel more official now.

It’s not just the emissions, either.

Today’s EPA proposal deals specifically with tailpipe emissions for light, medium, and heavy-duty vehicles — in other words, cars, trucks, vans, buses, and large work vehicles. Passenger cars will be the most visible and meaningful example for most people, but these new regulations hit across the board.

According to the proposed rules, vehicles made from 2027 through 2032 will face vastly stricter emissions regulations such that it’s going to be easier for automakers to be in compliance if they mostly sell EVs instead. The EPA even projects as much in its announcement today.

That isn’t all that’s happening. What’s gotten less attention so far are reports that the U.S. Department of Energy is also due to revise how it defines “MPGe” — a somewhat obscure and ill-understood measurement that means the “miles per gallon equivalent” for electric and plug-in hybrid cars. It basically gauges an EV’s energy consumption compared to internal combustion vehicles; you see it on any EV’s spec sheet at the dealership. The rules are about 20 years old.

Without getting too deep into the weeds, MPGe calculations could soon be revised downward to meet a more modern, realistic standard in line with their actual behavior. According to Reuters, this means a Ford F-150 Lighting’s MPGe could drop from 237.1 to 67.1 MPGe, and a Chrysler Pacifica PHEV’s rating will go from 88.2 to 59.5 MPGe.

Fuel economy for automakers is measured in averages for their entire fleets. (You may have heard of Corporate Average Fuel Economy or CAFE.) So by revising MPGe to be more realistic, it keeps automakers from meeting their fuel economy average requirements by sandbagging things with a couple of EVs, like the one person in a group project who does all of the work for everyone. Environmental groups like the Sierra Club have asked for this change for years.

Furthermore, another American auto regulator, the National Highway Traffic Safety Administration, is due to release revised CAFE rules soon as well. Those are expected to get much more strict as well, Reuters reports, even more so than were released last year when the agency reversed the Trump administration’s rollback.

Taken altogether, this means new cars of the late 2020s into the 2030s and beyond must be cleaner, and more fuel efficient, and automakers will not be able to rely on a handful of EVs to carry the weight of their whole fleets. They will have to produce more efficient vehicles with cleaner emissions soon — or no emissions at all. That this is all happening at once does not feel like a coincidence.

Automakers, and the world, were already on this course.

Again, the zero-emission car revolution has been in the works for many years. Automakers are largely global enterprises now that don’t like to sell multiple types of vehicles in different markets for cost reasons (though Americans specifically do love their big trucks) and they’re staring down an all-EV market in China and outright ICE bans in Europe. These rules now put America on the same trajectory as other nations and regions — or even some of its own states, like California. They also seem to limit the number of America-specific cars that could be out of compliance with strict global standards.

But it all begs the question: Can it be done? Even Loren McDonald, the head of EV marketing and research firm EVAdoption, said he has his doubts.

“When I looked at the 50% target, I think that was actually achievable,” McDonald said. “Sixty-seven percent by 2032 is a whole other level.”

He said that hitting this goal would require 80%-90% zero-emission vehicle adoption in some of the most populous U.S. states like California. For these reasons and more, including income, various cultural factors and the scarcity of charging, he sees this as a tougher ask in more rural states.

Among his concerns are the still-high cost of EVs, which need to be brought down considerably; the obvious need to grow the public charging infrastructure; the fact that many of the ICE cars on the road now could stay on the road for decades to come; and the ongoing lack of charging options for people in multi-family homes.

On the upside, McDonald said he thinks these new rules could spur some novel innovations that we haven’t seen yet.

“The best thing about this is they haven’t dictated the powertrain,” McDonald said. Future zero- or lower-emission cars could mean a variety of things, although battery EVs remain the most likely long-term solution for passenger cars.

“That will help the GOP [critics of Biden], the automakers, the lobbying groups and so on,” he said. “They’ve said these cars don’t have to be EVs. They recognize that’s probably the way to get there, but it does encourage innovation — maybe long-range hybrids or even other types of fuels.”

Typically, automakers throw a fit whenever they are faced with strict new standards, before developing new technologies to meet these challenges. But switching from a century of gasoline-powered car infrastructure to a battery-centric one does have legitimate, realistic challenges.

These are the concerns expressed by one of the auto industry’s largest lobbying groups, the Alliance for Automotive Innovation — but not without a surprising degree of optimism too.

“The question isn’t can this be done, it’s how fast can it be done, and how fast will depend almost exclusively on having the right policies and market conditions in place to achieve the shared goal of a net zero carbon automotive future,” said the alliance’s president and CEO John Bozzella in a blog post after today’s news.

Many of Bozzella’s concerns show what a long-game approach this will require, from ramping up EV production to increasing chargers to bringing all involved costs down. Taken altogether, it feels almost like the Biden Administration’s equivalent of President Kennedy ordering a moon landing by the end of the decade in 1961.

But Gonzalez, of Zero Emission Transportation Association, said she views today’s news on a much more positive note. She said that the eventual goal is to build an infrastructure where batteries can be recycled over and over again, their minerals repurposed for new uses, so that they cannot be depleted the way gasoline eventually will be.

Gonzalez added that even if Biden loses the White House in 2024 or the Republicans gain power over the Senate, these proposed EPA rules could go into effect in 2027. That means the earliest a new administration could make changes is by 2026, and by then, the auto industry will have already spent years moving toward these aggressive goals. At the same time, she thinks significant growth in charging, battery manufacturing, and more is needed to support zero-emission transportation.

“I think we’re going to get there,” Gonzalez said. “I think folks are doing everything they possibly can to get there.”