Brent Snavely

Detroit Free Press

TRAVERSE CITY — A simmering debate that normally occurs behind closed doors over whether changes should be made to fuel economy and greenhouse gas emissions standards spilled out into the open Tuesday at an automotive conference in Traverse City as government regulators clashed with industry groups.

Two groups that represent automakers argued that regulators have set standards that must be met by 2025 far too high and say the regulations are out of step with the cost of developing the technology and what consumers want to buy, while regulators said evidence shows automakers are capable of meeting current standards and potentially even higher standards.

The auto industry, environmentalists and government regulators are in the middle of reviewing possible changes to regulations that will influence how automakers spend billions over the next decade as well as the kind of cars and trucks they will develop and sell at auto dealerships.

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For consumers, the outcome of the regulatory battle ultimately will determine what kind of cars automakers develop and sell. More aggressive regulations are likely to force automakers to develop cars that get better fuel economy, or electric and hybrid cars with a better range, as well as reduced greenhouse gas emissions, which is better for the environment.. However, those cars could cost more money and automakers argue that most consumers will not want to pay the amount of money the regulations currently in place for 2025 would add to the price of cars.

Mitch Bainwol, president and CEO of the Alliance of Automobile Manufacturers, said the standards are inconsistent, too aggressive and will force automakers to sell cars that will cost more than consumers are willing to pay.

But Chris Grundler, director of air quality for the federal Environment Protection Agency, argued that the industry has made more progress than expected over the last four years, proving that it is capable of making even more progress over the next 10 years.

Despite pleas from the auto industry, the federal government issued a report last month that kicked off a yearlong review process of the standards that concluded that very little needs to be changed.

"To me, I think the standards and the policy is working spectacularly," Grundler said during a speech at the Management Briefing Seminars, a conference that drew several hundred industry executives and analysts this week.

"Automakers are outperforming these standards while they hitting new sales records. ... So we think the industry is very well-positioned to meet the customer expectations while reaching significant new levels of environmental performance," he said.

What's more, Grundler said, there is an urgent need for the automotive industry to rapidly reduce greenhouse gas emissions because of the growing threat of climate change.

"Here's the challenge. Science tells us if we are going to avoid the worst of climate change we need to reduce greenhouse by 80% by 2050," Grundler said.

The EPA regulates greenhouse gas emissions while the National Highway Traffic Safety Administration is in charge of regulating fuel economy.

The technical assessment report did conclude automakers would likely only reach an average of 50 m.p.g. to 52.6 m.p.g. instead of a fleet-wide target of 54.5 m.p.g. for all automakers by 2025. That admission has caused environmentalists to argue that regulators should force the industry to meet even higher standards.

Automakers, environmentalists and any other interested parties have until mid-September to submit official comments in response to the technical assessment report that is part of a mid-term review that both the industry and the government agreed to conduct in 2012. The government has until next April to make a final decision on whether or not to change the standards.

Grundler declined to comment directly on whether a new administration could derail the process. He said only that the EPA bases its decision on what the law says, where does science lead regulators and on what the agency believes is the right thing is to do.

Despite the best efforts of regulators, John Bozzella, president and CEO of global automakers, said the current regulations are inconsistent from one agency to another.

"We have programs that have different reasons for being. And what that does it creates different incentives. Each program has different tools, to manage not only compliance but to manage innovation while meeting consumer needs and we really need to work through that."

Bainwol said just because automakers have successfully met tougher standards every year since 2012 doesn’t mean they will be able to meet the 2025 standards.

“The second half of the marathon is a tougher road. And very few products get there,” he said.

One of the central issues the auto industry frequently raises is whether or not consumers will be willing, or able, to buy the vehicles that the government is mandating. Automakers say they likely will be able to develop the technology needed to meet tougher standards, but they could cost as much as $5,000 more than comparable cars.

Bainwol said a survey conducted by the Alliance revealed that only 7% of consumers said they would spend $5,000 more for a vehicle while 70% of consumers said they would pay $2,000 or less.

"So the appetite to buy is really, really low," he said.

Bainwol's point is even more powerful in light of the steadily increasing average transaction prices of cars. In July, the average transaction price of a car topped $34,254, according to Kelley Blue Book. What's more, the development of other aspects of cars, such as self-driving technology and fast evolving infotainment systems, could also continue to drive up the price of cars.

"($5,000 more) would crush my customers. It would crush me as a dealer," said Wes Lutz, owner of Extreme Chrysler Dodge Jeep Ram in Jackson.

But Diarmuid O'Connell, vice president of electric carmaker Tesla Motors, said most automakers have failed to make electric cars with enough range and adequate performance.

Automakers also continued to press the issue of California's Zero Emission Vehicles standards that require 15.4% of vehicle sales in that state to be fully-electric vehicles, plug-in electric vehicles or hydrogen fuel-cell vehicles by 2025.

Those regulations, in place in California and nine other states, were crafted by the California Air Resources Board.

Mike McCarthy, chief technology officer of CARB, said the agency knows that automakers could achieve more fuel-efficient vehicles for less money by improving vehicles with gasoline engines but it has no intention of backing off of the ZEV standards.

McCarthy said the standards are designed to force automakers to develop technology that will make a bigger difference in the long run.

"We do have a ZEV regulation. It is a mandate and we openly call it a mandate," he said.

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Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.