WINDSOR, Ontario—Auto suppliers are in danger of being left alone on a "technology island" if the U.S. rolls back fuel economy standards, IHS Markit Automotive's Michael Robinet warned during a presentation at the Automotive Parts Manufacturers' Association conference in Windsor.
President Trump and his administration are intent on lowering the standards for 2022-2025 model year vehicles, reversing the progress made by former President Obama.
During the final days of the Obama administration, the U.S. Environmental Protection Agency finalized the 2022-2025 corporate average fuel economy standards calling for a projected 51.4 mpg by 2025 and hefty fines for violators.The administration used auto bailouts during the 2008 and 2009 recession to get auto makers to agree to better fuel economy standards. The move to tough new standards prompted auto makers to complain that the EPA did not properly evaluate all the data regarding costs and consumer acceptance of new technologies.
Now, Trump is looking to flatten those regulations.
If that happens, it could spell trouble for auto makers and their suppliers, Robinet said.
He said 20 to 30 years ago, North American auto makers and law makers weren't advancing fuel efficiency as quickly as their European counterparts, where diesel, for example, was a big part of the mix. That left auto makers and their suppliers based in Canada and the U.S. alone "on an island," Robinet said.
"But, we caught up," he said.
While Canada is pursuing its own tough climate change policy, including a separate national electric-vehicle strategy, it still aligns its fuel efficiency standards with those of the U.S. And, about 80 percent of vehicles manufactured in Canada are shipped to the U.S.
Most suppliers build for the market in which they's located, or at least a market that is close to them, Robinet said. That means, suppliers in Canada manufacture parts used in North American. Weaker standards would limit the size of supplier's market; or make it hard to expand overseas, for example.
"If [fuel] regulations flatten out, you start to have disparity between different markets. This is a major issue," Robinet said. "If you're a domicile supplier in North America and you are asked to go global, it's a competitive disadvantage.
"From a global perspective we're starting to diverge from the rest of the market."
Mark Nantais, president of the Canadian Vehicle Manufacturers Association, said the North American market and its harmonized fuel standards are "inextricably linked."
"Environment Canada and Climate Change needs to continue their work with the U.S. EPA in this next rule making phase," Nantais said in an email to Automotive News Canada. "And CVMA is committed to providing information and data to Environment Canada and Climate Change officials to assist them with their evaluation in Canada, giving careful consideration to both the environmental and economic impacts in a North American market."