The U.S. auto industry used to dominate the global market. Today, we’re playing second fiddle to China. Unless we come up with a national strategy that ensures a vibrant industry, we’re going end up losing what’s left.
The traditional auto industry is nearing a breaking point. The old order is starting to crumble due to a combination of seven unprecedented changes.
First, we’ve hit Peak Auto. New-car sales were higher 25 years ago than today, even though the U.S. population has grown by 58 million people. If the same percentage of Americans bought a new car as they did in the year 2000, automakers would have sold 22 million vehicles last year, not 16 million. The trend lines suggest we’ll never go back to previous levels.
Second, technology is upending the way cars are designed, engineered and manufactured. Software-defined vehicles, zonal-centralized computing platforms and digital twins are obsoleting the old way of doing things.
Third, the industry invested billions of dollars in electric vehicles that haven’t paid off. While EV sales continue to grow, they’re not growing fast enough. Worse, for the auto industry, Congress just eliminated EV incentives.
Fourth, the talent shortage. President Trump wants to bring back manufacturing, but who’s going to work in the factories? Every company I visit says their No.1 problem is getting the people they need. There are currently half a million manufacturing jobs nationwide going begging.
Fifth, China. It now leads the global auto industry in technology, innovation and speed to market. While Chinese automakers are effectively banned from the U.S. market, they’re on a global export binge the likes of which we’ve never seen before.
Sixth, the tariffs. They have crippled the highly efficient North American supply chain. Tariffs may buy time for the Americans to catch up to the Chinese, but they do nothing to solve the problems listed here.
Seventh, government regulations. The EPA is focusing on CO2 regulations. NHTSA sets fuel economy regulations. But the only way we know how to cut CO2 emissions is by burning less fuel, which is effectively a fuel economy regulation. The EPA’s CO2 regulations and NHTSA’s corporate average fuel economy (CAFE) regulations are trying to achieve the same thing, but with different targets, timetables and procedures.
Here’s a suggestion. Why not get rid of NHTSA’s CAFE standard and simply rely on the EPA’s CO2 standards? The result will be about the same, but it would get rid of a ton of regulation.
Meanwhile, NHTSA writes safety regulations that add more structure and safety tech to cars that make them heavier, which means they burn more fuel and produce more emissions. And yet, even with all this safety equipment, traffic fatalities are 30% higher than before that equipment was added. Seems to me we need to rethink the whole approach.
Instead of different agencies writing rules that duplicate each other, or even conflict, why not establish one Office of Automotive Regulation? It could issue regulations that are stable and predictable. I believe we can regulate the auto industry a lot more efficiently and still achieve world-class levels of clean air, fuel efficiency and vehicle safety.
All these problems the auto industry faces are invisible to the general public and the country’s political leadership. When it comes to lobbying in Washington, DC, the industry punches well below its weight. Imagine if the Alliance for Automotive Innovation (the OEMs), the Motor Equipment Manufacturers Assn. (the suppliers), the National Auto Dealers Assn. and the UAW all spoke with one voice. They could exert enormous political power.
It is in the self-interest of the U.S. to have a healthy and vibrant automotive industry. It is an economic engine for the economy and critical to the national defense. It’s time for a comprehensive national strategy to keep it that way. We lose by waiting, so let’s get going.
