Four Automakers Make a Deal With California Regarding Vehicle Emissions

Matt Posky
by Matt Posky

While we’ve dinged the media for erroneously reporting that automakers were unilaterally “backing” California in the fuel-economy fracas that’s currently taking place within American politics, it appears four of them actually are starting to choose a side. However, this again requires a bunch of clarification. Despite not adhering fully to the state’s ideal emissions scenario, Ford Motor Co., BMW Group, Volkswagen Group, and Honda Motor Co. released a joint announcement stating they have reached a voluntary agreement with the state of California to adopt compromised vehicle emissions rules.

Since there’s nothing binding in the joint agreement and automakers make (and break) promises all the time, the deal is largely meaningless. Doubly so, since the fuel-economy rollbacks have yet to be finalized. But this does illustrate how a handful of manufacturers are willing to accommodate others in order to get a nationwide solution. It also shows a softening of California’s previously ironclad environmental stance, which is much more interesting.

According to The Washington Post, California Air Resources Board (CARB) matriarch Mary Nichols said that the automakers approached her with the plan last month. “What we have here is a statement of principles intended to reach out to the federal government to move them off the track that they seem to be on and onto a more constructive track,” she said, saying it was a better proposal than the White House’s plan to halt creeping mileage standards between 2020 and 2026.

While California still wants to maintain its ability to self-regulate, the newly suggested deal is a compromise to the Obama-era standards the state previously vowed to adhere to by any means. Participating automakers will improve their fleet-wide efficiencies by 3.7 percent per year (starting in 2022), with California allowing for 1-percent of that to be covered by simply building electric vehicles (which includes plug-in hybrids and hydrogen-powered cars). In addition to those EV breaks, the deal raises the cap for winning credits for fuel efficiency improvements not captured by traditional testing. The compromise would also remove a requirement to account for upstream emissions of fuels — which seems counterintuitive when you’re hoping to regulate air pollution.

Nichols claimed CARB floated a similar proposal by the Trump administration months earlier. However, since both sides claim the other can’t compromise, it’s hard to know who is actually telling the truth. Talks were relentlessly unproductive and totally broke down in February. This single factor is every automaker’s primary concern. Regardless of which side manufacturers appear to be on in any given moment, their primary goal is achieving a national plan that avoids splitting the U.S. market in twain.

“A 50-state solution has always been our preferred path forward and we understand that any deal involves compromise,” reads the automakers’ joint statement.”These terms will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions.”

While stringent emission regulations in Europe and Asia are already shaping the vehicles we buy in North America, some of those trends don’t mesh with consumer tastes and the United States’ lower fuel prices. The Alliance of Automobile Manufacturers reported 69 percent of U.S. new vehicle sales were light trucks (SUVs, pickups, vans, etc.) in 2018. As a result, sales-weighted vehicle efficiencies have stagnated over the last few years. In fact, improvements in real-world economy over the last decade seem to be dictated more by gas prices and national finances than the Obama-era standards. The regulatory framework that’s being developed by the Environmental Protection Agency and the National Highway Traffic Safety Administration have attempted to address that at the expense of rising efficiency targets.

“This voluntary framework is a PR stunt that does nothing to further the one national standard that will provide certainty and relief for American consumers,” said Michael Abboud, a spokesman for the EPA, in an email to The Washington Post.

If you made it this far, the takeaway should be that California appears to be softening its hardline stance, which is good news if you’re rooting for compromise. The state’s leadership has called on other automakers to join the plan while urging the White House to play ball. California Governor Gavin Newsom has recently been asking that talks be reopened so that his state can avoid a lengthy legal battle with the federal government. He praised the new deal, suggesting it would improve air quality. “I now call on the rest of the auto industry to join us, and for the Trump administration to abandon its regressive proposal and do what is right for our economy, our people, and our planet,” he said.

As for the automakers, they’re still technically playing both sides while throwing California a bone. Ford, Volkswagen, Honda, and BMW all have a vested interest in appeasing the Golden State — especially if it is allowed to continue self-regulation. However, if the federal government strips it of that power and commences with an aggressive rollback, they’ll still be in the clear. All four already have a vested interest in electrification and will have to build increasingly efficient cars to adhere to regulations in China and Europe. But they also wan’t the best deal for their U.S. business. That’ll be the lowest possible standards available on a national level. After all, it wasn’t all that long ago when Trump was new to the Oval Office and the auto industry sent its top executives specifically to ask that he torpedo existing efficiency mandates and other pesky regulations.

[Image: CC7/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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5 of 37 comments
  • TheDumbGuy TheDumbGuy on Jul 26, 2019

    So these four will sell most of their electric vehicles in Cali-fornia, to keep the democrat/socialists happy there, and will sell the rest of their vehicles in the other 49 states. What's the big deal ? Even without this agreement, that is what they would have done anyway, due to customer preference in Cali for the greener, electric vehicles. They only put in writing what they think will happen anyway.

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    • Inside Looking Out Inside Looking Out on Jul 27, 2019

      @mcs I remember green cars were popular in 90s exactly for the reason of being environmental movement symbol. I even owned emerald '94 Taurus which is kind of greenish color. Car itself was old tech (like OHV engines when every other car on the planet had DOHC) and poorly made as if technology did not advance since 1985.

  • Sthepanic Sthepanic on Jul 26, 2019

    Including upstream emissions in a vehicle emissions/CO2 regulation doesn't make any sense and will hopefully also be removed from the federal regulation when it is released this fall. The upstream emissions rule requires automakers to include the CO2 emitted from the electricity production by the electrical utility for charging PHEVs and BEVs in the total of CO2 emitted from the vehicle over it's lifetime. The rule assumes an average CO2 g/KWh for the entire country, regardless of how clean your local utility is. This would be equivalent to washing machine or light bulb manufactures being required by law to offset the CO2 emitted due to the electricity consumed by their products after they are sold. I think we need to regulate the CO2 produced due to electricity production (we don't currently), but trying to do it through car emissions regulations is stupid.

  • Dave M. The Outback alternates between decent design and goofy design every generation. 2005 was attractive, 2010 goofy. 2015 decent. 2020 good, but the ‘23 refresh hideous.Looking forward to the Outback hybrid in ‘26…..
  • Lorenzo Subaru had the ideal wagon - in 1995. The Legacy Outback was a straight two-box design with rear quarter and back windows you could see out of, and was available in brown with a 5-speed manual, as God and TTAC commenters intended. It's nice they're not raising prices, but when you've lost the plot, does it matter?
  • Bkojote Remember a month a go when Cleveland wanted to create a more walkable Cleveland and TTAC's 'BIG GOVERNMENT IS THE PROBLEM' dumbest and dullest all collectively crapped their diapers? Here's the thing- look on any American highway and it's littered with people who don't /want/ to be driving or shouldn't be. Look at every Becky on her phone during the morning commute in her Tucson, look at every Brad aggro driving his 84 month loan GMC. Hell look how many drivers nowadays can't even operate a headlight switch. You expect these people to understand a stoplight? In my neighborhood alone 4 people have been rear ended at lights from someone on their phone. Distracted driving over the past 10 years has spiked, and it's only going to get worse unless Becky has an alternative, because no judge is going to pull her license when 'she needs it to get to work!' but heaven forbid she not check fb/tiktok for 40 minutes a day.
  • Scott Shouldn't the The Italian Minister for Business be criticizing The Milano for being too ugly to be Italian?Better use of resources doing that....
  • Steve Biro Frankly, while I can do without Eyesight and automatic start-stop, there is generally less B-S with Subarus in terms of design, utility and off-road chops than with many other brands. I just hope that when they adopt Toyota’s hybrid system, they’ll also use Toyota’s eCVT.