Return auto industry to the free market

Opinion editor’s note: Strib Voices publishes a mix of national and local commentaries online and in print each day. To contribute, click here.

•••

President-elect Donald Trump is promising to relieve the American automobile industry of the pressure from Washington to rapidly deliver an all-electric-vehicle future.

That starts with getting the government out of the auto industry.

The incoming Trump administration has the opportunity to streamline industry regulations, make fuel emissions standards more reasonable and predictable, lower energy prices and force down interest rates, all of which will hopefully cut sticker prices, which are nearing an average of $50,000.

The shift will be disruptive in the short term for the Detroit Three, which went all-in on Washington’s vision that EVs would ultimately replace gasoline-powered vehicles. They still might, but not at the pace the manufacturers and the government expected.

The auto industry’s push to an all-electric future has come into question, with low demand for and slower-than-anticipated adoption of EVs. Even before Trump won, automakers were adjusting to the market realities and scaling back their focus on all-electric vehicles.

General Motors announced earlier this year it would reduce 2024 EV production, building 50,000 fewer EVs in North America than previously projected. Ford also cut EV production in direct response to “margins and pricing compression,” according to chief financial officer John Lawler.

Trump’s plans should give automakers room to recalculate the market and focus on other options, including hybrids and high-efficiency gasoline engines.

In the third quarter this year, national sales of EVs increased by 7.8% year-over-year, putting the EV share of sales at its highest recorded point. But that is still just 8.9% of all vehicle sales. Consumer choices are still being influenced by the $7,500 federal tax credit for EV purchase.

Those consumer credits should go away. Initially intended to introduce EVs to a skeptical public, they have become a permanent part of the pricing of electric vehicles. The government has no business subsidizing automobile sales.

If the marketplace won’t sustain EVs, then the strategy of forcing the transition to an electric fleet should be revisited.

Trump has also vowed to repeal parts of the Inflation Reduction Act, which includes subsidies to automakers for EV research and development and to build battery plants.

These companies have posted enormous profits in recent years. If they see a long-term return on EVs, they should fund those investments themselves.

Along with tax breaks for companies that manufacture cars in the U.S., the Trump administration has signaled it will scale back or eliminate Environmental Protection Agency emissions standards that force automakers to push EVs.

We are less enthused about Trump’s plan to tax cars not made in the U.S. at incredibly high rates — more than 100% in some cases — which he says is a negotiating tool. It’s also another distortion of the market that will hurt consumers.

Trump has threatened to prohibit individual states such as California from imposing its own Corporate Average Fuel Economy (CAFE) standards. That’s long overdue. Manufacturers need a consistent, national regulatory regime.

Washington’s takeover of the auto industry should come to a close. While some regulatory oversight is necessary, federal rules should not be used to dictate what vehicles Americans can drive.

That approach has increased mobility inequity. The Census Bureau reports nearly 60% of American households can’t afford to purchase a new vehicle.

Backing the government out of the auto industry and allowing market forces to determine the appropriate vehicle mix is in the best interest of both the manufacturers and their customers.