The Art of the Deal: Saving the U.S. Auto Industry from a “Planet-Saving Agreement”


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May 29, 2001
The Art of the Deal:

Saving the U.S. Auto Industry from a “Planet-Saving Agreement”

The Auto Industry Under Assault

by HENRY PAYNE July 8, 2017 4:00 AM

France, Volvo, and Trump’s timely withdrawal from the Paris Climate Accords

One of the Trump Administration’s most crucial economic decisions was its withdrawal in June from the Paris Climate Accords. Politically, the decision upheld a campaign promise. Practically, it avoided saddling the country with the deal’s arbitrary, restrictive CO2-emissions caps.

Just how suffocating those strictures could have been was illustrated this week when the French government upended its automotive sector by mandating the elimination of gas and diesel engines by 2040 in order to meet the climate accord’s targets. The decision will give French consumers — and manufacturers — no choice but to transition to expensive, unproven battery-powered vehicles. It comes on the 25th anniversary of the publication of Al Gore’s Earth in the Balance, in which the then-senator called for eliminating the internal combustion engine by 2017. Needless to say, none of the environmental calamities Gore predicted a quarter century ago have come to pass

But that hasn’t slowed the march of wrongheaded policies meant to combat climate change. Just 24 hours before the French government’s decision, Volvo announced that it would electrify every vehicle in its lineup beginning in 2019.


Volvo’s announcement was met with universal praise from left-wing U.S. media; it was also universally mis-reported.


Not quite. In truth Volvo’s decision will help perpetuate the internal combustion engine, which still makes up the overwhelming majority of vehicle sales. While the automaker will add a plugin-hybrid option to every model line and build five all-electric cars beginning in 2019, its core, best-selling gas- and diesel-engine variants will simply add a small, 48-volt battery to compliment existing twelve-volt batteries.

Where traditional twelve-volt batteries turn on a car’s lights and infotainment systems, the 48-volt unit will help power the influx of electric features — steering racks, brake pumps, etc. — into modern cars, while increasing fuel economy by 10–20 percent in order to satisfy looming Chinese and European CO2 mandates. (Europe will force automakers to reduce the CO2 emissions of their vehicles to 95 grams per kilometer by 2021.) In short, contrary to news reports that Volvo is ending gas engines, the company is merely making such engines compliant with the coming rules.


Volvo’s compliance strategy is understandable, because few customers are buying electrified vehicles. In France, just 1.1 percent of new cars sold are fully electric. In the U.S., despite over 50 new battery-powered vehicles introduced since 2009, fully electric models have just a 2.4 percent share of the automotive market.


In condemning the Trump Administration’s withdrawal from the Paris Accords, media darling and former Obama EPA official Marge Oge told the New York Times that “the rest of the world is moving forward with electric cars. If the Trump administration goes backward, the U.S. won’t be able to compete globally.” In reality, the opposite is true.

Thanks to less-stringent emissions rules and low gas prices, the U.S. is essential to most automakers’ profits, driving as it does the high-margin sales of popular pickup trucks and SUVs that can’t be sold elsewhere in the world.

GM, for example, withdrew from the European market this year because its small cars are unprofitable there.

Ford joined the corporate chorus in condemning Trump’s Paris withdrawal saying that “we believe climate change is real, and remain deeply committed to reducing greenhouse gas emissions in our vehicles and our facilities.”

Yet the politically correct statement would seem a financial death wish. Some 80 percent of Ford’s profit reportedly comes from U.S. pickup sales. A France-like gas-engine ban to satisfy CO2 targets would destroy the company’s bottom line.


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Volvo’s decision to add a 48-volt battery unit to all of its models will add $1,000 to $1,500 to the cost of each vehicle… Not a huge incremental change to a $38,000 car. Doing the same thing to $16,000 economy vehicles is a very expensive add-on.

While Ford may have been publicly virtue signalling, in private they were probably engaging in a collective sigh of relief.

June 2017 U.S. Auto Sales: Top 20 Vehicles and Top 7 PEV’s

Vehicle June 2017 Sales Type
Ford F – Series PU 77,895 PU
Chevrolet Silverado PU 50,515 PU
Dodge Ram PU 43,073 PU
Nissan Rogue 34,349 SUV
Toyota RAV4 34,120 SUV
Honda Civic 30,909 Sedan
Honda Accord 29,791 Sedan
Toyota Camry 29,463 Sedan
Toyota Corolla / Matrix 29,432 Sedan
Chevrolet Equinox 29,182 SUV
Honda CR-V 28,342 SUV
Nissan Altima 28,042 Sedan
Ford Escape 27,151 SUV
Ford Explorer 24,285 SUV
Nissan Sentra 22,534 Sedan
Jeep Grand Cherokee 20,176 SUV
Jeep Wrangler 18,839 SUV
Ford Fusion 17,432 Sedan
Toyota Highlander 17,237 SUV
Toyota Tacoma PU 16,443 PU
Tesla Model S 2,350 PEV
Tesla Model X 2,200 PEV
Chevrolet Volt 1,745 PEV
Chevrolet Bolt 1,642 PEV
Toyota Prius Prime 1,619 PEV
Nissan Leaf 1,506 PEV
Ford Fusion Energi 707 PEV
Ford sold 77,895 F-series pickup trucks in June. Total PEV sales were just 17,182 vehicles. Ford sold 4.5 F-series pickup trucks for every PEV sold in the U.S. in June. Ford sold 18,139 Fusions, 707 (4%) of which were PEV (Fusion Energi).

69% of June vehicle sales were SUV’s and/or pickup trucks:


Will U.S. automakers follow Vovlo’s lead and put extra batteries and hybrid engines in all of their pickup truck and SUV models? Only if an actual market for such vehicles evolves.

PEV’s might make sense in places where there’s a $3/gal gasoline tax. However, the average residential electricity rate in the U.S. is $0.12/kWh.

Gasoline Gallon Equivalent (GGE) 33.4 kWh/gal
Gasoline Price ($/gal) Electricity ($/kWh)
$ 2.00 $ 0.06
$ 2.50 $ 0.07
$ 3.00 $ 0.09
$ 3.50 $ 0.10
$ 4.00 $ 0.12
$ 4.50 $ 0.13
$ 5.00 $ 0.15
$ 5.50 $ 0.16
$ 6.00 $ 0.18

On Sunday, I filled my Jeep’s tank for $1.99/gal (including taxes) a GGE of $0.06/kWh. That’s comparable to the LCOE of a conventional combined cycle natural gas power plant ($0.0586/kWh) and about half of what I pay for electricity (~$0.11/kWh).

So, when you dream about charging your Tesla Model 3 with green energy, try not to dream about solar thermal or offshore wind, unless you like nightmares…

Plant Type Total System LCOE ($/kWh) GGE
Conventional Combined Cycle $ 0.0573 $ 1.91
Advanced Combined Cycle $ 0.0565 $ 1.89
Advanced CC with CCS $ 0.0824 $ 2.75
Coal 90% with carbon sequestration $ 0.1232 $ 4.11
Wind – Onshore $ 0.0637 $ 2.13
Wind – Offshore $ 0.1459 $ 4.87
Solar PV $ 0.0850 $ 2.84
Solar Thermal $ 0.2420 $ 8.08
Hydroelectric $ 0.0660 $ 2.20
EIA Levelized Cost of Electricity 2017

The levelized cost of generation of electricity from offshore wind is the equivalent of $4.87/gal and solar thermal is $8.08/gal.

Will gasoline always be this cheap in the U.S.? No. But even at $4/gal, it breaks even with electricity at $0.12/kWh.

Even in the land of Tesla (California), the PEV math doesn’t look good.

The average residential electricity rate is nearly $0.19/kWh and gasoline is nearly $3/gal.

Charging up the first Tesla Model 3 (in Elon Musk’s garage) will cost the equivalent of $6/gal.

So, thank you President Trump for saving our automobile industry and energy consumers from the “planet saving agreement.