‘Big Trouble’: Here’s How Newsom’s California Is Killing the American Auto Industry

• Stellantis plans to lay off thousands of workers in Detroit and Ohio in 2024 in order to adjust to California’s strict emission standards, raising concerns that other automakers may have to do the same, experts told the Daily Caller News Foundation. 
• California has the strictest environmental standards in the country for vehicles and can use its dominant market share to influence broader U.S. trends, coercing automakers to design more expensive cars to fit that market, the experts said.
• “Considering the losses and layoffs we’ve already seen, the effects on the auto industry could be devastating,” Marlo Lewis, senior fellow at the Competitive Enterprise Institute, told the DCNF. “Millions of middle-income households are already priced out of the market for new motor vehicles.”

(Daily Caller)—California’s strict emission standards are poised to move the entire auto market towards more expensive, lower-emission vehicles, endangering the American auto industry, which is already posting huge losses in the electric vehicle market, experts told the Daily Caller News Foundation.

Top U.S. car manufacturer Stellantis sent notices to 2,455 workers in Detroit and 1,225 workers in Ohio on Dec. 8, notifying employees of possible layoffs to come in February in a move to shift its production to comply with California’s regulations that are increasingly cracking down on internal combustion engine vehicles, according to Barron’s. The projected layoffs from Stellantis could be one of many in the auto industry as California’s environmental regulations shift markets across the country, despite electric vehicles still not being affordable for many Americans and profitable for automakers, according to experts who spoke to the DCNF.

“The California standards have a huge impact,” Marlo Lewis, senior fellow at the Competitive Enterprise Institute, told the DCNF. “Both the [Environmental Protection Agency] in its proposed greenhouse gas motor vehicle standards and the National Highway Traffic Safety Administration (NHTSA) in its proposed corporate average fuel economy (CAFE) standards cite California’s [zero-emission vehicle] mandate as driving vehicle electrification in the U.S. Moreover, under Clean Air Act Section 177, other states may opt into California’s ZEV and [greenhouse gas] standards — if those policies are lawful in the first place, which of course California and its state and federal agency allies claim is the case.”

California is emboldened by the Environmental Protection Agency’s current standards under the Clean Air Act, which dictates that states must follow the federal government’s vehicle emission standards or opt into California’s more restrictive requirements. California has passed restrictions facilitating the switch away from traditional vehicles, requiring that all new cars, pickups and SUVs be electric or hydrogen-powered by 2035.

“The standards have a large effect because automakers don’t want to make different cars for different states,” Diana Furchtgott-Roth, director of the Center for Energy, Climate and Environment at the Heritage Foundation, told the DCNF. “That is why California affects the rest of the country. In addition, another 16 states have voluntarily said they will copy California’s laws.”

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California Gov. Gavin Newsom has previously touted the “California Effect,” which dictates that because of the state’s size and market share, it can dominate national trends and influence manufacturers, forcing them to tailor products to the standards or risk missing out on the market entirely, according to The New York Times. The state has the fifth-largest economy in the world.

“Considering the losses and layoffs we’ve already seen, the effects on the auto industry could be devastating,” Lewis told the DCNF. “Millions of middle-income households are already priced out of the market for new motor vehicles. Ford’s F-150 Lightning costs about $14,000 more than the comparable internal combustion engine (ICE) model. Energy analyst Robert Bryce reports that during second quarter 2023, Ford lost $72,762 for every EV it sold, and that in July, Ford projected $4.5 billion in EV-related losses by year’s end—more than double the company’s $2.1 billion EV business losses in 2022.”

Following the losses, Ford sent out a memorandum on Tuesday to suppliers that it was cutting production of its F-150 lightning pickups in 2024 from a weekly target of 3,200 to 1,600 units.

As losses mount for automakers, the Biden administration is pushing for even greater production with subsidies to the EV industry. The Biden administration, through the Inflation Reduction Act, has instituted a $7,500 tax credit per EV in an attempt to make the cars more affordable.

“The standards will raise the costs of transportation, disproportionately hurting poor people, small businesses and farmers,” Furchtgott-Roth told the DCNF. “Some people like EVs, but others find them to be more expensive, inconvenient to charge, and difficult in cold climates because they lose range. Plus, these EVs make America depend on China. The auto industry is losing money trying to comply with the standards because people are not buying electric vehicles in sufficient quantities.”

While the number of people buying EVs is growing, not enough people are opting into buying an EV to keep up with the rising supply following the regulations and subsidies in the industry. The total volume of EVs sold in January was 3% of new cars, making up 3% of market share, but as of September, volume has risen to 6%, while sales have only risen to 4%.

The current production of EVs requires the use of rare earth minerals, specifically in the vehicle’s battery, with China currently controlling around 87% of the world’s refining capacity for the components. The U.S. has so far been unable to compete in the market, but the Department of Defense has committed millions of dollars to cultivating domestic ventures.

“This agenda is a massive threat to consumer welfare,” Lewis told the DCNF. “In the short term, some automakers may profit from government handouts and the narrowing of competition. In the long term, an industry that does not produce what consumers want at prices they can afford is in big trouble.”

The California governor’s office did not immediately respond to a request to comment from the DCNF.

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