Suspend The Regs? Not That Easy

In a recent article, the automotive industry journalist John McElroy wrote that what the U.S. government should do is suspend its regulations on automobiles so that carmakers could bring their fuel efficient European stuff over here instantly.

In his article, McElroy made it sound like it would just be a matter of Congress passing a bill that suspends regulations. In reality, it wouldn't be that easy, and may not even be desirable. Here are a few reasons:

First, emissions politics. The EPA has set tough emissions standards for cars based on legislation such as the Clean Air Act, as it has been required to do by Congress. In order to suspend the emissions regulations, Congress would have to pass a law that effectively repeals many other laws. California is permitted to set its own more stringent clean air rules because of the curse of the geology of the Los Angeles area, which acts like a smog trapping bowl. European governments, unlike the U.S., have long regulated more for fuel economy than emissions, and as a result, they have lots of diesel vehicles--which won't pass NOX regulations unless complicated and expensive aftertreatment systems (like urea injection) are added.

The environmental lobby will howl that the atmosphere will be dirtied, and it will be a political brawl which will make the ANWR drilling fracas look tiny.

Second, economics. European cars, pound for pound, are quite a bit more expensive than American cars. Partly this is due to Value Added Tax and other levies, but because Europeans are used to paying quite a bit more for their cars, they tend to have more content than their U.S. counterparts. Consider the Honda Civic: in Europe, the Civic comes with standard goodies like ESC, active head restraints, and automatic climate control.

To bring European designs here, carmakers will either have to charge more than people are used to paying, or saveagely decontent vehicles to keep the price down. Already, many people are looking at Smart cars and snickering, because you don't get much for your money compared to domestically produced small cars.

Third, competition. Allowing carmakers to bring European designs here will open the gates for even more brutal competition for the reeling domestic carmakers, and even the well established foreign car makers. Brands like Fiat, Peugot, Citroen, Seat, and Renault, which were long ago defeated could come rushing back like a tidal wave.

Yes, consumers would have many more vehicles to choose from, but our already fragmented marketplace would become even more fragmented, and it would be difficult for anyone to make money.