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Biden faces political, auto industry pressure as EPA emissions decision nears

By Grant Schwab, The Detroit News
Published: March 10, 2024, 6:00am

WASHINGTON — Donald Trump wants to create an electric vehicle problem for Joe Biden in Michigan — but the sitting president already has one.

After almost a year of pressure from automakers and industry groups, the Biden administration is expected to soften proposed regulations meant to sharply curb vehicle emissions and promote EVs, two sources familiar with the situation told The Detroit News. The move would come as Michigan and the auto industry take center stage in the looming Trump vs. Biden battle for the White House.

“They ordered a hit job on Michigan manufacturing with this insane electric vehicle mandate,” the Republican frontrunner said during a speech in Waterford Township, Michigan, last month that telegraphed what’s likely to be a frequent line of rhetorical attack against Biden in the coming general election campaign.

Asked if policies promoting EVs are a political liability for Biden, U.S. Rep. Debbie Dingell, the Ann Arbor Democrat, told The Detroit News: “I think Donald Trump is going to make it one.”

Technically speaking, the Biden administration’s original proposal was not an EV mandate. But Trump and his allies are trying to stoke that notion to persuade Michigan voters that a second Biden term would crush individual purchasing freedoms and cripple the state’s bellwether auto industry.

How much Biden scales back the final rules when they’re released later this month or next would signal his willingness to compromise in an election year and accept tough feedback from a critical industry in one of the most consequential electoral states in the country.

EVs will be essential to meeting future emissions targets, even if the final regulations are scaled back when they’re released. But in Michigan, EVs are less popular with consumers than in any other state Biden won in 2020. Adoption rates are still low across most of the country as the auto industry struggles to figure out a formula for providing profitable, affordable EVs and lagging vehicle-charging infrastructure remains a headache for drivers.

Dave Dulio, an Oakland University political scientist, said EV policy is important for Biden in Michigan. EVs are “a really important issue for a really important segment of the electorate,” he added, referring to blue-collar auto workers in Michigan who are concerned about job losses as the Detroit Three continue to lose money on EVs. Models with internal combustion engines, meanwhile, remain profitable for the companies.

“There’s enough stories out there about California, for instance, where it sure as heck seems like a mandate from the state government to phase out gas-powered engines,” he said. “I think Trump has picked up on that and is going to hammer that because he sees it as a winning issue.”

In reportedly softening its tailpipe emission reduction targets, Dulio called the Biden administration smart to recognize they “had their foot too hard on the gas pedal.”

“The apparent revisiting of this by the Biden White House and the (Environmental Protection Agency) is a very grudging concession to a reality that’s been bluntly apparent to the auto industry for at least a year,” said Patrick Anderson, CEO of East Lansing-based Anderson Economics Group.

The EPA rule is part of a series of proposed regulations that, in concert with a proposal from the Department of Transportation, would slash the allowable emissions from new vehicles to a quarter of their current levels by 2032. Used vehicles would not be subject to any new restrictions.

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The White House under Biden says it has committed to “tackling the climate crisis with the urgency that science demands.” As part of that effort, the president and his team have strongly supported EVs.

The initial EPA proposal suggested that EVs will need to make up 67% of all new vehicle sales by 2032 to meet the new standards. Ford Motor Co., Stellantis NV and General Motors Co. have all committed to electrifying their fleets to address climate change and keep up with what they see as the future for the auto business.

“GM strongly believes that EVs are the future of transportation,” the company said in a public comment on the EPA proposal. Ford wrote in its comment that the Dearborn automaker is “all-in on electrification.” But the companies said they need more time.

When the draft rule was released in April 2023, the Detroit Three said it was too aggressive. In its public comment, Stellantis warned: “Overly optimistic projected policy solutions lead to unrealistic assumptions of BEV (battery electric vehicle) market acceptance, along with resource redeployment to electrification and long lead times for ICE hardware changes, creating risk for compliance in the criteria emissions space that is untenable.”

More simply, Ford warned against going “too far too fast.” Both automakers expressed support for “Alternative 3” within the rule proposal, which sets the same end targets but slows the ramp-up between 2027 and 2032.

General Motors said it supported previous Biden administration goals of achieving 50% EV market share for new vehicles and 60% emission reductions by 2030. Rather than requiring emissions reductions beyond that, GM encouraged the EPA “to develop an innovative opt-in compliance pathway that rewards companies that deliver greater-than-projected EV volumes.”

The automaker wants more of the carrot-not-stick approach that was prominent for green energy programs in the Inflation Reduction Act. The law, passed in 2022, includes tax credits for the purchase or lease of electric vehicles, subject to domestic sourcing requirements.

The Alliance for Automotive Innovation, a trade group representing all the major automakers in the U.S. except for Tesla Inc., also has said the EPA proposal is too aggressive.

“Pace matters. The next three or four years are critical for the development of the EV market as we move beyond early adopters,” alliance president John Bozzella said in a statement. “Give the market and supply chains a chance to catch up, maintain a customer’s ability to choose, let more public charging come online, let the industrial credits and Inflation Reduction Act do their thing and impact the industrial shift.”

Tesla, which last year made $1.8 billion from sales of regulatory tax credits earned from EV sales, was the only U.S. automaker to support the EPA’s proposal. While Tesla profits from tailpipe emission regulations, legacy automakers face fines.

“The new generation of emissions requirements have punitive fines on them. That could essentially bankrupt a company that attempted to do business in a manner that ignores them,” said Anderson, of Anderson Economics Group. He said regulatory pressure already is pushing automakers to make money-losing products to avoid fines.

“Look at Ford Motor Company’s $4.7 billion loss on EVs in 2023 alone. A substantial portion of that comes from building vehicles where the demand isn’t there yet, where Ford knows they need to start building vehicles so that they’re ready for an uncertain amount of demand later on.”

Despite those losses now, Tu Le, an industry observer and founder of Sino Auto Insights, said the Detroit Three need to get more aggressive on EVs to stay competitive with Tesla and foreign automakers like BYD Co., the Chinese EV powerhouse that recently announced plans to locate a factory in Mexico.

“They need to move faster, but they’re not moving faster. They need to make bolder decisions, but they’re not making bolder decisions, despite what Wall Street says,” Le said. “Slowing down the transition plays into Tesla and BYD.”

Dingell, for her part, also warned that the United States needs to press forward with EVs to keep pace with China, though she declined to comment on what targets the EPA should set in its final rule: “I’m seasoned enough to remember when the domestic market here lost 10 years because Japan was ready with small cars when gasoline prices went up, and the domestic market wasn’t prepared.

“If we’re gonna stay at the forefront of innovation and technology … this is the direction we’ve got to go,” Dingell added. “China’s already trying to out-compete us. China’s government is subsidizing it. … I’m not (ceding) our leadership to anybody. Nor is Joe Biden.”

Environmental groups have urged the EPA to keep its original proposal. “Since these rules were proposed last year, they have only become more feasible to achieve,” Kathy Harris, director of the National Resource Defense Council’s clean vehicles program, wrote in a blog post this week.

“What’s clear is that for decades, EPA’s standards have worked, despite what some automakers and the oil industry may claim,” she added. “Just as the oil industry and some auto dealers are whining now, industry has complained about EPA’s standards every step of the way — but once the rules are in place automakers, have shown they can cut pollution while providing the vehicles Americans want to buy.”

The Sierra Club issued a similar statement last week: “Enough excuses from the auto industry. Automakers have had more than enough time to prepare for the EV transition, and funding from the Inflation Reduction Act is rolling out the infrastructure necessary to support it. We can and must have union-made clean vehicles. We urge the EPA to remain steadfast in finalizing a strong rule that will improve public health and protect our future.”

In Michigan, the Environmental Defense Fund launched a television ad last month specifically promoting the benefits of EVs in the state that helped put the nation on wheels. The commercial came in response to new anti-EV ads in 2024 battleground states from a top oil and gas lobbying group.

The ad features Mark Rowland of Eaton Rapids, a Republican and Air Force veteran who promoted EVs as consumer money-savers that are good for Michigan jobs.

“When I bought my Chevy Volt 10 years ago, my friends were surprised. They thought it was a hippie car,” Rowland said in the ad. “But I know performance when I see it.”

But the ad — without meaning to — highlights the growing pains of EVs in Michigan and why a softer final version of the EPA tailpipe rule could be an important compromise for Biden.

Chevy discontinued the Volt, a plug-in hybrid vehicle, in 2019. By then, it was losing money for the company. And after the automaker replaced it with the fully electric Bolt, it temporarily halted that line a few years later in 2023 for similar reasons.

“You can’t just build the vehicles and hope for the best,” said Samuel Abuelsamid, principal e-mobility analyst at market research firm Guidehouse Inc. “You actually have to address every aspect of that ecosystem — charging the battery, manufacturing, the mineral sourcing, the whole supply chain and the recycling at end of life. Both the automakers and the Biden administration until relatively recently had some pretty unrealistic expectations.”

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