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Obama zeroes in on fuel efficiency

Posted by Hootan Mahallati | January 27, 2009 | In founder's thoughts news

Obama

On Monday, President Obama took another step toward fulfilling his campaign promises: he signed two executive orders that will affect the automotive marketplace in the United States in a big way. In one of the orders, the President has asked the Department of Transportation to issue tougher fuel economy standards in an effort to curb greenhouse gases. In the other, he has asked the Environmental Protection Agency to review the applications of California and 13 other states, in which they asked to be able to set their own statewide emissions rules. The Bush administration had previously blocked these applications.

This news has justifiably triggered diverse reaction across the automotive industry. Some insiders warn of irreparable harm if states are allowed to set their own diverse rules (it should be noted that the 13 states in question have all indicated that they would adopt California’s rules if the applications are accepted).

While no one disputes the need to create more fuel-efficient cars, the topics at hand are highly complex. In the case of fuel-efficient products, Americans are still not fully committed, as demonstrated by the sudden plunge in hybrid sales as soon as gas prices plummeted. Mike Jackson, CEO of AutoNation, correctly said last week that cheap gasoline spells disaster for fuel-efficient vehicles. In other words, there needs to exist an environment in which consumers will naturally opt to buy fuel-efficient models, not just when they are under financial strain.

As for the state-by-state regulation, I frankly think it would be a mess were it to be passed. Yes, conservative and libertarian politics supports state legislation as opposed to federal mandates, but that kind of thinking is hogwash in this case. Having to comply with a myriad of different rules would force manufacturers to build variations of the same model car for different markets, especially if some states’ tougher rules make the cars sold in that market unprofitable. I say, let California, the state that has always led the way on emissions standards, set the law for the country so that the car companies can begin their R&D cycles. Some companies may not be able to make it, but let Darwinism rule.

As for those in the car industry complaining about how hard it is to quickly retool for more fuel-efficient cars – get over it. Engineering cars is not a simple task, but it is amazing just how resourceful humans can be when a fire is lit under their proverbial derrieres. I think President Obama just lit that fire, and we are going to see some remarkable transformations in the auto industry.

[Source: Automotive News free subscription]

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