Auto Industry Ignoring CAFE Rollback, Moving Forward with Electrification

In August 2017, the Trump administration announced its intent to freeze corporate average fuel economy (CAFE) and CO2 emissions standards at 2020 levels, abandoning the previous plan for continued increases through 2025. While the auto industry had hoped for a bit of added flexibility in light of the market shift away from smaller cars, no manufacturers favor this policy change. In fact, based on recent product announcements, it appears that Guidehouse Insights’ projection was on the mark regarding administration policies having little effect on electrification plans.

The market shift to SUVs and crossovers has forced the auto industry to take dramatic steps to adapt, including the discontinuation of many car nameplates in both North America and Europe. General Motors (GM), Ford, and Fiat Chrysler are all adding new utility vehicle nameplates and ramping up electrification plans despite the pending regulatory changes. 

GM Begins to Revamp for Electrification and Automation

GM CEO Mary Barra has written and spoken publicly about the need to invest in electrification and automation. GM is conducting a massive revamp of its product development team, buying out and laying off staff that focused on internal combustion powertrains and doubling the number of engineers with expertise in automation and electrification. While specific product announcements are yet to come, they will undoubtedly focus on these areas. 

Ford Removing Previous Limits for Electrified Options

Meanwhile, in recent months, Ford has redesigned two of its three best-selling products, the Explorer and Escape, along with Lincoln variants badged as Aviator and Corsair. As promised in March 2018, each has electrified powertrain options, including either strong hybrid EVs (HEVs) or plug-in hybrid EVs (PHEVs). In the case of the 2020 Escape, which goes on sale in fall 2019, it will have both HEV and PHEV options, with the PHEVs having more than 30 miles of electric range. 

Escape chief engineer Jim Hughes told Guidehouse Insights that he expects 18%-20% of Escape customers to opt for the HEV, while another 5%-7% are expected to choose the PHEV. As the first domestic automaker to introduce a hybrid (on the 2005 Escape), the company has had significant success selling electrification in volume on the few platforms it offers. After limiting electrified options over the past decade, Ford is now going all-in with availability on all redesigned models going forward. 

Ford is also planning inclusion of new full battery EVs (BEVs), starting with a performance crossover that will be shown later in 2019 and go on sale in 2020. Ford recently announced plans to add production of another BEV at its Flat Rock, Michigan plant alongside the Mustang, which will get a hybrid variant in 2020. Even the F-150, which has been the best-selling vehicle in America for 40 years, is going hybrid in 2020 and fully electric in the next few years. 

Fiat Chrysler Set to Debut Electrification in the Coming Years

Fiat Chrysler, which has lagged behind on electrification, added mild-hybrids to the latest editions of the Jeep Wrangler and Ram 1500 and promised a PHEV Wrangler in 2020. At the recent Geneva Motor Show, Jeep showed off PHEV variants of the popular Compass and Renegade SUVs that will debut in 2020. More HEVs, PHEVs, and BEVs will be coming from Jeep, as well as Fiat Chrysler’s other brands, in the next several years. 

Demand and Competition Outweigh US Government Deregulation

Automakers are trying to compete in global markets where there is increasing pressure to add electrification. This is combined with growing demand and competition in the domestic market. Regardless of whether the US government deregulates CAFE and CO2 emissions standards, the global economy has recognized the need to decarbonize and the auto industry is responding.