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Government Motors Is Back



General Motors

has recharged since being bailed out by the government in bankruptcy nearly a decade ago. But now Government Motors is back: The largest U.S. automaker wants the Trump Administration to juice its bottom line with a truckload of electric-car mandates and subsidies.

Electric cars make up a mere 1% of U.S. sales, but manufacturers have been required to produce an increasing number to comply with California’s zero-emissions vehicle mandate and federal fuel-economy (Cafe) standards. China, which accounts for half of the world’s EV sales, has also imposed aggressive mandates with generous consumer and manufacturer subsidies.

Yet battery technology has lagged government ambitions. Longer-range EVs can take eight hours or more to charge, and a battery cell for a medium-sized vehicle costs more than $13,000—equivalent to the material cost of an entire gas-fueled compact car. Since electric cars remain unattractive to consumers beyond the rarified quarters of Palo Alto or Bel Air, they typically sell at a loss.

The Obama Administration nonetheless sought to compel auto makers to produce ever more electric cars by requiring an average fleet fuel economy of 54.5 miles per gallon by 2025. Car manufacturers rightly said the Cafe ramp-up was infeasible, so in August the Trump Administration proposed freezing the 2020 target of 37 miles per gallon through 2025.

No good gesture goes unappreciated. Auto makers now complain that the Trump Administration’s deregulation has gone too far and that they won’t get regulatory credit for their electric-car investments. They also worry that they may still have to increase EV production to meet California’s quotas that have been adopted by nine other states.

The Obama Environmental Protection Agency issued California a waiver under the Clean Air Act that allows it to set its own emissions standards, and the state has threatened to sue to enforce its authority. Yet under the Clean Air Act, the EPA may reject a waiver if California “does not need such standards to meet compelling and extraordinary conditions.”

Unlike ozone-causing pollutants, CO2 doesn’t affect California any more than it does the other 49 states. But car makers say they can’t handle the legal uncertainty and want California and the Trump EPA to compromise. Enter GM, which last month in public comments responding to the Cafe revisions proposed a “national electric vehicle program.”

This is regulatory arbitrage masquerading as political virtue. After Tesla, GM is the nation’s top electric car maker. Its Chevy Bolt has the longest range among mid-priced cars at 238 miles per charge. After announcing plans last year for 20 new zero-emission vehicles through 2023, GM is expanding a battery lab in Michigan.

GM’s plan would provide credits for production based on factors like battery range that have no bearing on emissions. Credits are ripe for political manipulation, and, right on time, GM is trying to game the system. GM suggests awarding 1.5 times as many credits for heavier duty vehicles and six times as many for driverless cars. GM’s Cruise startup is ahead of most manufacturers in the self-driving car race. As in California, credits could be banked and traded. No doubt GM hopes to emulate Tesla by hoarding and selling credits as the quotas increase.

GM also proposes to replace the 200,000 per manufacturer cap for the federal $7,500 tax credit with an industry-wide phase-out once electric cars exceed 5% of the U.S. light-duty fleet. While Tesla has already hit the limit and GM is expected to do so this quarter, most auto makers at their current sales rate won’t for half a decade.

GM’s cars would thus become less competitive, and it has a point that the existing cap punishes manufacturers that sell more EVs. But the better solution is to scrap the tax credits and let manufacturers compete on a level plane. The bigger problem, as GM acknowledges, is that electric cars still can’t compete with gas-fueled cars without government subsidies and mandates.

Hence GM also wants the feds to finance public and private workplace charging stations and more research in battery technologies. Other brainstorms include a national requirement that all new homes include EV chargers and federally funded “K-12 education programs, and media programs that highlight the benefits of driving electric.” Yes, a government propaganda program for GM products.

The irony is that liberals are already spurning GM’s fig leaf even though it could result in higher electric-car sales beyond California. The greens oppose any relaxation of the Obama Cafe standards and revocation of California’s authority to regulate the national auto market.

All of this underscores that liberals want to use fuel-economy standards to control more private economic production. The shame is that GM doesn’t seem to mind becoming Government Motors.



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