Car Wars: The Empire Strikes Luxurymakers

 

Having invested heavily in luxury automakers Tesla and Fisker, the Obama administration is now putting the screws to their gas-engine competitors, Porsche, BMW, et al.

In their regulatory plot to make the gas engine go the way of the incandescent light bulb, Obama’s EPA is not just mandating 56 mpg by 2025 — effectively creating a standard only hybrid electrics can meet — but putting in place harsh fines for companies that make engines they don’t like.

“Future U.S. government fuel economy regulations could saddle auto makers with steep fines or even bar the sale of certain models,” reports the Wall Street Journal’s Sharon Terlep. “Violations of proposed government standards could cost auto makers up to $25,000 a vehicle beginning in 2016, up from current levels of $5 to hundreds of dollars per vehicle.”

Fines for failing to meet arbitrary mpg edicts have been the cost of doing business for luxury automakers for decades since Corporate Average Fuel Economy (CAFE) rules debuted. Mercedes, for example, paid $2.9 million in 2010 because it makes a limited menu of high-performance vehicles that the company cannot offset with tiny fuel-sippers as major manufacturers like Toyota and GM do. But now that EPA’s green priestess Lisa Jackson has taken over CAFE enforcement from NHTSA, the sin taxes are gonna get painful.

“This is basically an attack on the way they do business because the things they traditionally sell are based on size and power,” Bill Visnic, an auto analyst with Edmunds.com, told the Journal. “To do something like this is essentially putting them out of business here.”

And putting them out of business would benefit . . . Washington’s “investments.”

Not uncoincidentally, the Obama Energy Department has invested $529 million in Fisker Automotive and $465 million in Tesla. Both are Silicon Valley–based, Friends-of-Barack, luxury electric carmakers.

Fisker will use its federal loan to build the $100,000 Karma and $50,000 Nina luxury electrics. Their wealthy buyers will get a further taxpayer gift of $7,500 on purchase.  Tesla’s loan goes to development of the $60,000 Model S sedan.

Meanwhile, the feds will be strangling gas-powered automakers with penalties — including Government Motors’ Cadillac division — as the draconian rules are phased in beginning in 2017 (less than two product cycles away). These automakers haven’t made electrics a priority because, well . . . their customers don’t want them.

Electrics are simply inferior to high-performance gas engines. Take Tesla’s $120,000 Roadster sports car. Though impressive in performance, it is less capable than the similar Lotus Elise — which costs half as much. That’s one reason the Roadster is going out of production this year.

“(Luxury automakers) have avoided the investment until now,” TrueCar.com auto analyst Scott Painter tells the Journal. “Now the American government is saying, ‘You’ve got to go do it.’”

And you thought central planning had gone extinct with the Soviet Gosplan.

“Praying for the insanity to blow over is the auto industry’s strategy for dealing with the Obama administration’s latest urge to double down on fuel economy mandates,” writes Journal columnist Holman Jenkins.

But prayer did not save light bulb jobs. Manufacturers must prepare for government edicts, and — like the feds bulb ban which has shut down factories across the U.S. — automakers will soon have to start retooling to make Washington’s green cars.

It will put luxury automakers in a tough spot: Make electrics its customers don’t want, or make gas-powered cars priced out of reach by government fines.

— Henry Payne is editor of TheMichiganView.com and cartoonist for the Detroit News.

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