Having invested heavily in luxury electric automakers Tesla and Fisker, the Obama administration is now putting the screws to their gas-engine competitors, Porsche, BMW & Co.
In its regulatory plot to make the gas engine go the way of the incandescent light bulb, President Obama’s EPA isn’t just mandating 56 miles per gallon by 2025 — effectively creating a standard only hybrid electrics can meet — but mandating harsh fines for companies that make engines the agency doesn’t like.
“Future US government fuel economy regulations could saddle auto makers with steep fines or even bar the sale of certain models,” reports The Wall Street Journal’s Sharon Terlep. “Violations of proposed government standards could cost auto makers up to $25,000 a vehicle beginning in 2016, up from current levels of $5 to hundreds of dollars per vehicle.”
Fines for failing to meet arbitrary mpg edicts have been the cost of doing business for luxury automakers since Corporate Average Fuel Economy rules debuted decades ago. Mercedes, for example, paid $2.9 million in 2010 because it makes a limited menu of high-performance vehicles that it can’t offset with tiny fuel-sippers as Toyota and GM do. But now that EPA Administrator Lisa Jackson has taken over CAFE enforcement from the National Highway Traffic Safety Administration, the sin taxes are gonna get painful.
Bill Visnic, an auto analyst with Edmunds.com, told the Journal: “To do something like this is essentially putting them out of business here.”
And putting them out of business would benefit . . . Washington’s “investments.”
Interestingly, the Obama Energy Department has invested $529 million in Fisker Automotive and $465 million in Tesla, both Friends-of-Barack luxury electric carmakers.
Fisker will use its federal loan to build the $100,000 Karma and $50,000 Nina electrics. Their wealthy buyers will get a further taxpayer gift of $7,500 on purchase. Tesla’s loan goes to developing the $60K Model S sedan.
Obama’s “electric-car standard” benefits a myriad of politically connected corporations that have received hundreds of millions of tax dollars for the manufacture of electric-car batteries.
Since 2009, Washington has “invested” more than $100 billion in these firms to realize Obama’s dream of a “green” America. Billions have been targeted at lithium-ion auto-battery suppliers, including $250 million for A123 Systems, $160 million for Dow and $150 million for LGChem — as well as $600 million total for GM, Chrysler and Ford.
Those manufacturers are dependent on federal cash — and the federal purchase of electric vehicles — to justify green manufacturing. Earlier this year, Obama mandated that the entire 600,000 federal vehicle fleet must consist of hybrid electrics. His administration, in other words, is mandating an artificial mpg standard to guarantee a market for its “investment.”
“Regarding the feds and the auto industry, conflicts of interest that used to be the exception are now the rule,” says Sam Kazman of the Competitive Enterprise Institute.
Meanwhile, the feds will be strangling gas-powered automakers with penalties — including Government Motors’ Cadillac division — as the draconian rules are phased in beginning in 2017. These automakers haven’t made electrics a priority because, well — their customers don’t want them.
Electrics are simply inferior to high-performance gas engines. Tesla’s $120,000 Roadster sports car, although impressive in performance, is less capable than the similar Lotus Elise — which costs half as much. That’s one reason the Roadster is going out of production this year.
“[Luxury automakers] have avoided the investment until now,” TrueCar.com analyst Scott Painter tells the Journal. “Now the American government is saying, ‘You’ve got to go do it.’ ”
And you thought central planning had gone extinct with the Soviet Gosplan.
“Praying for the insanity to blow over is the auto industry’s strategy for dealing with the Obama administration’s latest urge to double down on fuel economy mandates,” writes Journal columnist Holman Jenkins. But prayer didn’t save light-bulb jobs. Manufacturers must prepare for government edicts, and — like the feds’ bulb ban, which has shut down factories across America — automakers will soon have to start retooling to make Washington’s green cars.
It will put luxury automakers in a tough spot: Make electrics its customers don’t want, or make gas-powered cars priced out of reach by government fines.
Henry Payne is editor of The Michigan View.com, the Detroit News’ commentary Web site, where a version of this appeared.