As votes were counted late last week to determine the winners of the 2020 presidential and congressional elections, at least one likely outcome was emerging: another divided Congress with Republicans controlling the Senate and Democrats running the House. That means the auto industry could be caught in the middle of more congressional gridlock for at least the next two years.
For President-Elect Joe Biden, a continued stalemate between the two chambers would prevent a number of legislative efforts to reshape the industry from reaching the chief executive's desk.
The fate of fuel-efficiency standards and California's authority to restrict tailpipe emissions as well as the speed of development and adoption of electric vehicles and autonomous cars hangs in the balance.
If a divided Congress can find a way to come together on spending plans for EVs, infrastructure or other forward-looking technologies, it would likely be a moderate and pragmatic approach, analysts said.
"It keeps policy more in the center of the road," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Mich. "There are some goals that the industry may have wanted that they may not get."
The House appeared to be on track to remain under Democratic control. The balance of power in the Senate, however, could be determined by runoff elections in January for both of Georgia's seats.
The GOP candidates are favored to win and help the party retain its majority. But if the Democrats prevail, there would be a 50-50 split—including the two Independents who caucus with them—giving tie-breaking power to Biden's running mate, Kamala Harris.
Two scenarios
With the congressional makeup set until the 2022 midterm elections, two possible scenarios for the auto sector could become a reality, said David Whiston, U.S. autos equity strategist at Morningstar Inc.
"One scenario is that it's really good because government regulation and interference will stay out of the way," he told Automotive News. "Another scenario, though, is that it could create just tons of uncertainty that cripples or slows decision-making by the auto industry."
Biden likely would be up against an oppositional Senate that could rein in his aggressive $2 trillion climate plan that includes investments in automotive infrastructure, such as adding 500,000 EV charging stations nationwide.
The investment would be a "huge benefit" for companies making EVs, but gridlock could impede the pace, said Mark Rom, associate professor of government and public policy at Georgetown University's McCourt School of Public Policy.
"If you don't have that kind of infrastructure, that will certainly slow down our transition to an EV fleet just because it's hard for companies to finance that," Rom said. "This is one of those areas where, for the industry to thrive, government infrastructure seems pretty vital."
Washington gridlock
Biden also has proposed providing cash vouchers to consumers who trade in fossil fuel vehicles for U.S.-made electric models. The plans could be a boon to auto makers that are investing billions in new EVs and are planning to unleash a large wave of those vehicles on the market, though customer acceptance of them, thus far, has been slow.
"A Democratic program probably would be more aligned with our worldwide strategy, which is really to fight climate change, to become electric," Volkswagen Group CEO Herbert Diess said during a Bloomberg News event last week. However, the auto maker established "really a trustful relationship with the Trump administration and government."
Biden's EV plans—a centerpiece of his campaign—face an uphill battle. "What does a deadlocked Congress on that mean?" said Morningstar's Whiston. "It could be something like the $2 trillion number becomes a very different number—a much smaller number."
While regulation largely remains in the control of the executive branch, any kind of funding—whether it's spending, tax plans or trade policy—has to go through Congress, said Dziczek.
"It's the power of the purse," she said. "They're going to have to come to compromises on spending, and if those are not the goals of the Republican majority in the Senate … then those spending targets may be scaled back."
Several industry experts also say Biden is likely to pursue more stringent vehicle fuel-efficiency standards—similar to the Obama-era targets—and call off the litigation with California's Air Resources Board initiated by the Trump administration. That means auto makers selling in the nation's largest auto market and world's fifth-largest economy would need to ramp up their efforts on EV sales, according to Eric Ibara, a senior analyst with Kelley Blue Book.
"Bottom line, though, more gridlock in Washington is not good for the auto makers, who want clear, long-term policies," Ibara said. "And right now, it doesn't look like they will be getting that from D.C. beginning in January."
AV compromise?
Autonomous-vehicle regulation may be one area where a divided Congress won't hinder progress, as House law makers on both sides of the aisle say a federal AV bill will be a priority early next year.
Morningstar's Whiston said the bipartisan support for an AV bill from Reps. Debbie Dingell, a Michigan Democrat, and Bob Latta, an Ohio Republican, is "a great sign."
"It's really important that the federal government get moving on this and come to an agreement, and that's going to require some bipartisan cooperation because the technology is going to be there before the regulations are in place," Whiston said.
"We don't want that. We want regulation to be matching the pace of technology or at least very close to it."
