California is one of a handful of states that have opposed the administration's lower standards and vowed to maintain tough emissions standards on cars and trucks in their states. That posed a dilemma for carmakers since their products might be barred from some lucrative markets if they failed to meet those states’ emissions standards.
So Ford, Honda, BMW, and Volkswagen negotiated with California regulators who agreed to slightly lower their standards if the automakers would commit to meeting them instead of national standards proposed by the Trump administration.
Even though it will be more costly for carmakers to meet the tougher standards, they say doing so provides needed regulatory certainty. It also means they don’t have to build two versions of each model -- one that meets the lower national standard and the other that must meet the higher California standard.
An eventual Democratic administration would likely impose the California standards on a national basis anyway, requiring the car companies to make the expensive engineering changes at a later date.
Compromise
The four automakers were able to persuade California regulators to slightly lower their emissions standards in return for the companies agreeing to adopt them for all their vehicles.
Under the agreed-to set of rules the four companies’ vehicles would have to achieve 51 miles per gallon fuel economy by 2026 instead of 54.5 miles per gallon by 2025, called for in the Obama administration regulations.
The Trump administration is expected to stick with a standard requiring cars to achieve a 37 miles per gallon fuel economy rating.
30 percent of the market
The four carmakers striking a deal with California make up about 30 percent of the U.S. auto market. California Gov. Gavin Newsom said he believes more carmakers will join the agreement in the future.
At least one auto executive told The New York Times that the deal appears attractive because of California’s concessions. The executive said the Obama administration’s standards pose problems for automakers since they sell so many SUVs.
A manufacturer’s fuel economy rating is based on the mileage achieved by all the vehicles it sells. That’s a primary reason nearly all carmakers are committing to producing electric vehicles since they have very high fuel economy ratings.